Select Committee on European Scrutiny Eleventh Report



ELEVENTH REPORT

The European Scrutiny Committee has made further progress in the matter referred to it and has agreed to the following Report:—

EUROPEAN AVIATION SAFETY AGENCY

(21933)

14329/00

COM(00) 595

Draft Regulation on establishing common rules in the field of civil aviation and creating a European Aviation Safety Agency.
Legal base: Article 80(2) EC; co-decision; qualified majority voting
Document originated: 27 September 2000
Forwarded to the Council: 5 December 2000
Deposited in Parliament: 10 January 2001
Department: Environment, Transport and the Regions
Basis of consideration: Minister's letter of 22 March 2001
Previous Committee Report: HC 28-v (2000-01), paragraph 3 (7 February 2001)
To be discussed in Council: June 2001
Committee's assessment: Politically important
Committee's decision: For debate in European Standing Committee A (decision reported on 7 February 2001)

Background

1.1  In 1998, the Council mandated the Commission to negotiate the setting up of a new European Aviation Safety Authority as an international organisation. Member States' representatives agreed a draft outline Treaty in October 1999. However, some Member States flagged up potential constitutional problems in ratifying such a Treaty and the Council then asked the Commission to draw up proposals for an alternative Community-based system, involving the creation of a new Community agency. In June 2000, the Transport Council invited the Commission to make a proposal for such an Agency.

1.2  In February 2001, we reported on, but left uncleared, the Commission's draft Regulation providing the framework for a new system of aviation safety regulation, including a new Community agency. We requested further details on the issues set out in the Transport Council's Conclusions in December 2001 and the effect the draft Regulation might have on the capacity of the United Kingdom to reach bilateral agreements.

The Minister's letter

1.3  In his letter of 22 March 2001, the Parliamentary Under-Secretary of State at the Department of the Environment, Transport and the Regions (Mr Bob Ainsworth) has provided further information, as requested.

1.4  As regards the issues set out in the Transport Council's Conclusions in December 2001, the Minister says:

"The Conclusions drew attention to all those issues of importance to the Government set out in paragraph 16 of EM 143 29/00. In particular, the Council instructed COREPER to examine the proposal to ensure the following:

"That essential requirements truly reflect the legislator's intentions while remaining generic in nature. The Government believes this is crucial in ensuring that the Agency is delegated sufficient autonomy to make certification decisions efficiently and effectively. The draft proposal simply reproduces, as the essential requirements for airworthiness, an annex of the Chicago Convention. The annex is a mix of generic issues and more technical matters which are subject to quite frequent amendment; and it covers only large aircraft. All Member States agree that reproducing the Chicago Convention annex would be a mistake and an experts group, working closely with the Commission, is making considerable progress towards a set of requirements tailored specifically toward European needs.

"That the Agency is endowed with necessary powers to exercise its responsibilities, and that it should be able to attract high-quality staff. The Government attaches great importance to this issue; the Agency must be robust enough to command the support of the European aviation industry and the respect of the international community with which European manufacturers and airlines do business. The Agency needs to be able to attract a highly professional and skilled cadre of staff, led by someone of the highest reputation in the field.

"The definition of the liability of the Agency and other actors of the Community system is clearly established. The Government is determined to avoid a situation in which accountability is blurred, or where different players in the system can shuffle off responsibility onto others. One particular aspect to be clarified, as the EM noted, is the role of national safety regulators in the system.

"That, generally, the objectives the Council has set for the establishment of EASA (European Aviation Safety Agency) are reached. The UK Government has always been a strong advocate of working together in Europe to harmonise and raise safety standards. The Council objectives are generally to put aviation safety regulation in Europe on a sound long-term footing for the benefit of passengers, the general public and our industry".

1.5  As regards the effect the draft Regulation might have on the capacity of the United Kingdom to reach bilateral agreements, for example with the United States aviation authorities about the mutual recognition of certified aviation products and servicing arrangements, the Minister says:

"The proposal will affect the capacity of the UK to enter into bilateral agreements because the proposal establishes Community competence to establish the airworthiness requirements which products and appliances will be required to meet (article 5). Member State competence will cease to exist where Community competence is acquired but it will remain in areas, such as personnel licensing, where the Community has not yet brought forward proposals. Generally, we consider that the proposal develops the adoption by the Community of measures relating to aviation safety — in particular through articles 5 and 7 — and thus dispels legal uncertainty regarding the scope of application of the AETR[1] principle.

"This uncertainty has been particularly acute in relation to bilateral agreements of the kind mentioned in your Report — and has already been the subject of a number of Explanatory Memoranda. I refer to EM 5127/99 dated 1 February 1999 and the Supplementary dated 18 November 1999, about a draft Council Regulation amending Regulation 3922/91 on the harmonisation of technical requirements and administrative procedures in the field of civil aviation."

1.6  The Minister comments that the proposal was never discussed by the Council and its provisions have been largely reproduced in the current regulation. The Minister adds:

"In particular, article 9 refers to the acceptance of third country approvals and envisages a similar mechanism to cover bilateral arrangements whereby Member States would issue certificates on the basis of certification issued by the competent authorities of a third country, such as the United States. The Government's position on these provisions remains as set out in the earlier EMs.

"In addition, we have considered whether article 54 of the draft Regulation has implications for Member States' competence with regards to bilateral agreements. Article 54 provides for agreements between European States which are party to the Chicago Convention and the Community. Such agreements would seem to be principally concerned with the participation of third countries in the Agency to be set up by the Regulation and the Government considers it would be odd if Member States retained any power to enter into obligations with third countries relating to such matters. We conclude that article 54 raises no competence issues for Member States."

1.7  The Minister also comments on our earlier recommendation that a debate on EASA should be combined with a debate on the Commission's proposals on a Single European Sky.[2] He says:

"We would welcome a debate on the EASA proposals and consider that it would be helpful to have a debate earlier rather than later, and certainly some weeks before the June Council, if at all possible. However, given their complexity, I believe that separate consideration of these two issues could be advantageous.

"The case for separate debates is further strengthened by the fact that the Single Sky proposal is itself the subject of further work, which means that a debate on that subject would seem best left until later. We have recently received the draft of a further Commission Communication which is expected to issue formally later this month. The Communication elaborates a framework regulation for Air Traffic Management in Europe, including bringing forward ideas on civil/military coordination. We will be submitting an EM on this Communication in due course and you may wish to consider this further document before holding a debate."

Conclusion

1.8  On the basis of the Minister's comments, and given that we are due to receive a draft Communication on a framework for air traffic management in Europe, we agree that the European Aviation Safety Agency and "Single European Sky" proposals should be debated separately. We also agree with the Minister that a debate on the European Aviation Safety Agency would be most timely in advance of the Transport Council in June 2001, when the Swedish Presidency intends to seek a Common Position on the Agency.

STRATEGY FOR ENERGY SUPPLY

(22096)

5619/01

COM(00) 769

Commission Green Paper — Towards a European strategy for energy supply.
Legal base:
Document originated: 29 November 2000
Forwarded to the Council: 1 December 2000
Deposited in Parliament: 6 February 2001
Department: Trade and Industry
Basis of consideration: EM of 20 February 2001
Previous Committee Report: None
To be discussed in Council: No date set
Committee's assessment: Politically important
Committee's decision: For debate in European Standing Committee C

Background

2.1  In its introduction to this Green Paper, the Commission says that energy concerns have been a permanent feature since the very beginnings of European reconstruction, as evidenced by the fact that two of the three treaties establishing the European Communities are about energy (the European Coal and Steel Community Treaty and the Euratom Treaty), and aimed to secure regular and equitable supplies of coal and nuclear energy. However, it also notes that, in the Treaty establishing the European Economic Community, the Member States chose not to lay the foundations of a common energy policy, and that subsequent attempts to include a chapter on energy during the negotiations on the Maastricht and Amsterdam Treaties ended in failure, with energy receiving in the latter no more than a mention in the preamble. It says that there has thus never been a real Community debate on the main lines of an energy policy, and that, as a result, the energy problems which have arisen since the Treaty of Rome was adopted, more particularly after the first oil crisis, have been approached either through the mechanism of the internal market or from the angle of harmonisation, environmental policy, or taxation. This Green Paper attempts to set out the options facing the Community in the light of its growing dependence on imported energy supplies.

The current document

  • Part One: The basic facts about energy in the Community

I:  The impossibility of energy self-sufficiency

2.2  The Commission notes that, although the Community's economy has grown faster than its energy consumption, it is still using far more energy than it can produce. It further notes that, although industrial demand has been relatively stable as a result of greater technological efficiency, the increasing needs of households and the service-oriented sectors have more than made up for this. It highlights the particular importance of transport, both on account of its almost total dependence on oil, and the likelihood of continued growth in the future, notably in the case of air traffic. It therefore concludes that, despite measures such as those agreed with the automobile industry to reduce carbon dioxide emissions, progress will not be sufficient to reduce, or even come close to stabilising, the transport sector's energy demand. The Commission goes on to observe that, in the absence of any major technological breakthrough, energy demand will have to be supplied from already available sources (natural gas, coal, oil, nuclear, and renewable energy). It also suggests that new capacity will be predominantly gas-generated, with the number of oil and solid-fuel power stations continuing to decline, and that it currently seems unlikely that nuclear energy will see renewed growth.

2.3  The Commission then addresses Community energy resources, which it describes as "limited", and expensive to extract. It notes that, at current rates of exploitation, the Community has about eight years of known oil reserves, whilst those of natural gas represent about twenty years' consumption. On the other hand, whilst the Community has some 200 years' supply of solid fuel (coal, lignite, peat and oil shale), the quality is variable and the production costs high. Also, European coal is highly uncompetitive compared with imported coal, and this has led to production either being phased out or severely cut back. In view of this, the Commission suggests that difficult decisions will have to be taken on the future of the European coal industry. It also considers the situation as regards renewable energy sources. It says these have a "modest" role, but with the potential to play a much greater part in the energy balance, particularly if technical difficulties associated with sources such as biomass and biodegradable waste can be overcome. However, as things stand, the Commission expects the Community's dependence on imported energy to rise from 50% at present to nearer 70% over the next 20 to 30 years, with the figure for oil reaching 90%, that for gas 70%, and that for coal 100%.

2.4  The final section in this part of the Green Paper addresses the constraints facing the Community in seeking to reduce this level of dependence. These include international price levels (where it suggests that the Community's lack of competence and cohesion prevent it from having any influence); the concentration of supplies, especially of oil, in particular regions where spare production is limited and supplies from countries such as Iraq can be affected by wider political factors; and the political and environmental problems of transporting resources long distances. It also suggests that the measures taken so far to minimise the reliance on external energy sources — including supporting otherwise uncompetitive domestic production, a Community obligation to maintain stocks of petroleum-based products equal to 90 days' consumption, and programmes to promote energy efficiency and technological development — have not gone far enough. It concludes that the best guarantee of security of energy supply is to maintain a diversity of sources and supplies. This in turn will require Member States over the next ten years to make some fundamental choices regarding energy investment, which will dictate the structure of consumption over the next 30 to 50 years.

II:  The less than perfect energy options

2.5  This section of the Green Paper deals in greater detail with the various sources of energy supply. It observes that, at the end of the 1970s, coal and nuclear energy were thought to be the only alternative to oil — a view which, with hindsight, it describes as "somewhat dated". Indeed, it now suggests that these two options are "the undesirables". In the case of nuclear energy, it says that this is because of the impact on public opinion of accidents such as those at Three Mile Island and Chernobyl, and difficulties surrounding the handling and storage of waste, and it concludes that this sector cannot develop without a consensus which gives it a long enough period of stability, which it believes will only be the case when a satisfactory solution is found to the waste issue. At the same time, the Commission states that the Community must retain its leading position in the field of civil nuclear technology, in order to retain the necessary expertise, to develop more efficient fission, and to enable fusion to become a reality. In the case of coal, the Commission points out that, having been regarded as one of the cornerstones for European recovery after the war, coal production within the Community has been in rapid decline since the 1960s, due largely to competition from outside supplies (though other factors, such as its environmental impact, have contributed to this). It therefore takes the view that there is no prospect of longer-term production in the Community or among the applicant countries on the basis of economic criteria, but that the Community ought to consider whether there is a case for maintaining a production base in order to give access to reserves in the event of a serious crisis.

2.6  As regards other sources of supply, the Commission describes oil as "still the favourite", given its ease of use, which has had a particular impact on the transport sector. Nevertheless, it points to the fact that, although the countries of the former Soviet Union have become among the leading oil producers, more than 70% of the world's oil reserves are located in OPEC member countries, and thus potentially subject to wider political constraints. It therefore takes the view that intensive efforts are needed to curb consumption and to replace oil with alternative sources of energy.

2.7  It then identifies these as natural gas and renewable energy sources, which it describes as the "seductive alternatives". In the case of natural gas, it notes the rapid expansion in recent years at the expense of coal, but suggests that this in turn could give rise to a fresh structural weakness for the Community, with an increasing dependence on supplies from Russia, and a possibility of producer cartels emerging in the longer term. It considers that geographical diversification of supplies would be desirable, together with the development of partnerships with key suppliers. It sees renewable sources of energy as having considerable potential, and points out that, although there was a 30% increase in production from such sources between 1985 and 1998, they are still fairly insignificant in absolute terms. However, the Commission also says that any increase in the share of renewables will need a major effort, and that the potential varies as between different areas. Thus, whilst the prospects for the expansion of hydroelectricity are limited, it believes that biomass could significantly reinforce sustainable security of supply, as could biofuels (despite their high production costs, and the need to avoid highly intensive forms of agricultural production) and wind energy. However, it also identifies obstacles, not least that existing supply arrangements, particularly in the generation of electricity, are geared to conventional sources. It therefore suggests that one possible way of enabling renewables to take off would be to finance them by some kind of para-fiscal levy on the most profitable sources of energy (nuclear, oil and gas).

  • Part Two: A new reference framework for energy

I:  The challenge of climate change

2.8  The Green Paper draws attention to the causes of climate change, particularly the dependence of the power generation and transport sectors on fossil fuels, and to the implications if efforts are not made to reduce emissions of carbon dioxide, as required under the agreement reached at Kyoto in 1997. However, it describes that agreement as only a first step, and says that greater long-term objectives - in which the Community should take a lead - are necessary to reduce consumption and to increase the share taken by less carbon-intensive energy products.

2.9  In considering possible solutions, the Commission highlights the importance of taxation, and the need for this to be at a level high enough for a "coherent price signal to be given over long periods", but points to the major disparities which exist in this area between Member States. It also draws attention to the fact that, whereas the Community has set minimum levels of excise duty and VAT on mineral oils, there is no Community framework for other energy products or taxes, and that the existing arrangements contain numerous exemptions.

2.10  The Commission then addresses the extent to which the tax hierarchy in the Member States meets the needs of society. It points out that coal and natural gas are relatively lightly taxed, with renewable sources receiving exemptions or reductions, but that disparities exist, as for example between air and land-based travel, and that excise duties are still at levels which have only a marginal effect on consumer decisions. It argues the case for the upward harmonisation of energy taxation, on the grounds that this would improve the unity of the internal market by preventing distortions of competition and "tax competition", and it calls for the early adoption of the proposal it put forward in 1997 for a directive on the taxation of energy products. It also refers to the role of state aids, and proposes that it should make an inventory of all such aids as regards transport policy, energy policy, security of supply, and the need to promote renewable energy, to see whether these tie in with the Community's political priorities.

2.11  The Commission concludes this section of the Green Paper by looking at what it describes as the Community's ineffective demand management, where it says the impact of energy saving over the last ten years has declined appreciably since the 1980s. It also highlights the disparate results as between Member States, and the limited Community action to date in this area, and it says that it is considering a "clear legislative framework" for the priorities of future policies on energy efficiency and renewable energy sources.

II:  Gradual integration of energy markets

2.12  The Commission says that, although the Community has no competence in the field of energy, it has nevertheless been able to adopt a number of measures resulting in the completion of the internal market and a reduction in prices.

2.13  In the case of natural gas and electricity, it says that 80% and two-thirds of respective markets have been opened up, and that the legal framework within which this has taken place has provided a high degree of network security. It also highlights the public service aspects regarding the quality and universality of the service provided, and says that these have improved as a result of the steps which have been taken, with the separation of transmission from production being seen as a key factor. Nevertheless, the Commission identifies a number of obstacles which need to be overcome, including the low level of intra-Community trade and an inadequate network infrastructure (where it sees the constraints as political, rather than economic). It therefore suggests that the Community has an important role to play in giving the networks an international dimension, and that there should be a European mechanism to resolve outstanding infrastructure connection problems. The Commission also says that steps should be taken to speed up completion of the internal energy market, with greater separation between electricity generators and transport network managers, non-discriminatory network access by new generators and distributors, minimal charges for cross-border trade, clearer public service obligations, and the widespread establishment of an independent national regulator.

2.14  As regards oil, the Commission says that the market is far more competitive than those for other energy sources, but that efforts must still be made in the refining and distribution sectors. In particular, it says that, although the crude or refined oil market is transparent, market imperfections exist downstream, and that it is important to ensure that the distribution market remains open to new operators, especially independent ones. It is therefore enquiring into the barriers which such operators face, which it says will reinforce the similar steps taken by national competition authorities.

  • Part Three: Securing the future - outline of energy strategy

I:  The weaknesses in current energy supply

2.15  The Commission identifies a number of supply risks. These include physical risks (either permanent, where a source runs out, or temporary, as a result of political crisis, natural disasters or industrial action); economic risks (caused by price fluctuations); social risks (which are likely to arise where supplies are disrupted); and environmental risks (whether accidentally, or as a result of emissions). It then outlines forecasts to 2030 based on the continuation of existing policies and trends. These suggest that energy demand will increase much more slowly than economic growth, but with considerable structural changes in consumption, with natural gas as the fastest growing sector. The most significant forecasts, however, are that dependence on energy imports will increase from around 50% in 1998 to 71% in 2030, and that, despite switches from coal to natural gas, there will be higher carbon dioxide emissions. The Commission also suggests that the Community will not meet its renewable energy targets, and that the difficulties of tackling climate change in the long term will be increased by a phasing out of nuclear power.

II:  Tomorrow's priorities

2.16  This part of the Green Paper is divided into two sections dealing with controlling the growth of demand and with managing supply dependence.

2.17  The section on controlling demand divides policies into horizontal (internal market, energy taxes, energy saving schemes and new technologies) and sectoral (transport and buildings). More specifically, the sub-head of energy-saving schemes proposes that a 20% target for the use of fuel substitutes for transport and heating would not be unreasonable, whilst the transport sub-head states that the greatest effort to reduce emissions must be made in this sector.

2.18  The section on managing supply dependence proposes that there should be sustained efforts to promote the penetration of new and renewable energy sources (such as hydrogen and co-generation), and suggests that renewable energy could be financed by temporary levies on the profits of the oil, gas and nuclear sectors. It recognises the contribution of nuclear energy to security of supply and the reduction of emissions, and proposes support for the reactors of the future, notably fusion, and research into irradiated fuel management and waste storage. It also highlights the need to consider nuclear safety in the enlargement process, including closure of reactors that cannot be modernised. Attention is also given to preserving access to resources, where it is recommended that the Community should: take a greater role in oil stock management, including establishing a strategic oil reserve; consider extending the stocks mechanism to gas; and analyse the need to maintain a minimum production platform for coal. Other areas dealt with in this section are maintaining competition, where the Commission says it must tighten the competition rules in the downstream oil sector; ensuring external supplies, where it contends that the Community must use its political and economic influence to improve pricing mechanisms, use reserve stocks for mutual benefit, and forge an energy partnership with Russia; and strengthening supply networks, where it stresses the importance of interconnection with the Mediterranean and Central and Eastern Europe.

  • Guidelines for the debate

2.19  The Green Paper concludes by suggesting that the debate on future energy strategy should be structured around the following principal questions:

  • can the Community accept an increase in its dependence on external energy sources without compromising its security of supply and European competitiveness? For which sources of energy would it be appropriate, if this were the case, to foresee a framework policy for imports? In this context, is it appropriate to favour an economic approach (energy cost) or geopolitical approach (risk of disruption)?

  • does not Europe's increasingly integrated internal market, where decisions taken in one country have an impact on the others, call for a consistent and co-ordinated policy at Community level? What should such a policy consist of, and where should competition rules fit in?

  • are tax and state aid policies in the energy sector an obstacle to competitiveness in the Community or not? Given the failure of attempts to harmonise indirect taxation, should not the whole issue of energy taxation be re-examined taking account of energy and environmental objectives?

  • in the framework of an ongoing dialogue with producer countries, what should supply and investment promotion agreements contain? Given the importance of a partnership with Russia in particular, how can stable quantities, prices and investments be guaranteed?

  • should more reserves be stockpiled - as has already been done for oil - and should other energy sources be included, such as gas or coal? Should the Community take on a greater role in stock management and, if so, what should the objectives and arrangements be? Does the risk of physical disruption of energy supplies justify more onerous measures for access to resources?

  • how can we ensure better operation of energy transport networks in the Community and neighbouring countries that enable the internal market to function properly and guarantee security of supply?

  • the development of some renewable energy sources calls for major efforts in terms of research and technological development, investment aid and operational aid. Should co-financing of this include a contribution from sectors which received substantial initial development aid and which are now highly profitable (gas, oil, nuclear)?

  • seeing that nuclear energy is one of the elements in the debate on tackling climate change and energy autonomy, how can the Community find a solution to the problem of nuclear waste, reinforcing nuclear safety and developing research into reactors of the future, in particular fusion technology?

  • which policies should permit the Community to fulfil its obligations within the Kyoto Protocol? What measures could be taken in order to exploit fully potential energy savings which would help to reduce both our external dependence and carbon dioxide emissions?

  • can an ambitious programme to promote biofuels and other substitute fuels, including hydrogen, geared to 20% of total fuel consumption by 2020, continue to be implemented via national initiatives, or are coordinated decisions required on taxation, distribution and prospects for agricultural production?

  • should energy savings in buildings (40% of energy consumption), whether public or private, new or under renovation, be promoted through incentives such as tax breaks, or are regulatory measures required along the lines of those adopted for major industrial installations?

  • energy saving in the transport sector (32% of energy consumption) depends on redressing the growing imbalance between road haulage and rail. Is this imbalance inevitable, or could corrective action be taken, however unpopular, notably to encourage lower use of cars in urban areas? How can the aims of opening up the sector to competition, investment in infrastructure to remove bottlenecks and intermodality be reconciled?

  • how can we develop more collaborative visions and integrate the long-term dimension into deliberations and actions undertaken by public authorities and other involved parties in order to evolve a sustainable system of energy supply. How are we to prepare the energy options for the future?

The Government's view

2.20  In his Explanatory Memorandum of 20 February 2001, the Minister for Energy and Competitiveness in Europe at the Department of Trade and Industry (Mr Peter Hain) points out that the main aim of the document is to stimulate debate, but that the Government believes that the further development of liberalised, integrated and competitive markets in the Community and internationally is central to the issue of security of supply, although not the whole answer. He says that such markets can create diverse opportunities for investment and supply, as well as ensuring that the right price signals are sent to bring supply and demand into balance. The UK therefore strongly supports the efforts of the Commission, with Member States, to complete the single market on energy and to promote economic reform in supplier countries. It also supports the emphasis in the Green Paper on measures which reduce the demand for fossil fuels, whilst the promotion of renewable energy sources and improvements in energy efficiency contribute to environmental objectives as well as to energy diversity and security.

Conclusion

2.21  Although this document is a Green Paper, and thus does not in itself contain any specific legislative proposals, it is nevertheless a wide-ranging document which deals with an important area of policy, both from an economic and an environmental point of view. Moreover, there does in this instance seem to be merit in giving the House an opportunity to make a contribution at this early stage to the debate which the Commission has initiated. We are, therefore, recommending the document for debate in European Standing Committee C.

2.22  Members of that Committee will no doubt have their own views on which aspects of the Green Paper to pursue, though the Commission has helpfully provided a list of questions (in paragraph 2.19 above) which it sees as central to the debate. That said, it seems to us that the issues of particular importance are the extent to which it would be appropriate for the Community to seek to intervene in this area through harmonisation of fiscal policies; the justification for the stockpiling of reserves; the suggestion that aid towards renewable energy sources should be funded by levies on existing energy sectors; and the feasibility of seeking to address what the Commission describes as the growing imbalance between road haulage and rail.


1  The AETR principle states that the adoption of internal measures by the Community can give rise by implication to a power to act externally in the area covered by the measures. Case C-22/70, Commission v. Council, (ERTA ) [1970] ECR 263. Back

2  (20831) 13735/99; see HC 23-xxiv (1999-2000), paragraph 2 (12 July 2000). Back


 
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