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Energy and Industry Council

Dr. Stoate: To ask the Secretary of State for Trade and Industry if she will make a statement on the outcome of the Energy and Industry Council on 14 and 15 May. [1702]

Mr. Wilson: The council considered several matters of interest to the United Kingdom.

An exchange of views and adoption of Council conclusions on the Green Paper: Towards a European Strategy for the Security of Energy Supply, and a policy debate on the internal market in electricity and gas formed the centre-piece of this energy council.

On security of supply, the discussion was structured around a series of questions set by the Presidency: the need for a more co-ordinated approach; Community level measures that could be envisaged; the contribution of demand side measures and the development of new technologies; and the need to reinforce the dialogue with supplier countries. The UK welcomed the Green Paper as a good basis for debate, and said that market liberalisation was essential to the improvement of security of supply within the European Union and that a single market would provide the necessary investment signals. As far as indigenous resources were concerned the UK said it would continue to ensure that the North Sea was fully exploited. The UK supported measures to provide more effective control of demand, particularly in the areas of energy efficiency and fuel efficiency and in this respect we welcomed the proposed directive on energy performance in buildings. In response to the discussion on use of fiscal measures, the UK recalled that the reference to fiscal instruments in the Green Paper did not alter the requirement for unanimity in fiscal matters. Furthermore, the UK did not see any need for tax harmonisation measures in this area. Dialogue with supplier countries was important but the focus should not be exclusively on Russia. The aim should be to encourage a sound investment climate in supplier countries and avoid creating the impression that the EU was in a weak position by implying that we were desperate for fuel supplies. The conclusions were adopted.

On the discussion on the internal market, the UK welcomed both the draft Directive to accelerate the completion of the internal market in electricity and gas, and the draft Regulation on cross-border electricity trading, which should be treated as a single package. On the draft directive the UK stressed the need for legal separation of transmission and distribution operations, regulated third party access, independent regulation and 100 per cent. market opening as soon as possible. We supported the Netherlands' idea of a workshop to move

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council discussion forward quickly. We also urged the Commission to continue its work on cross-border tariffication and congestion management but at the same time indicated the need to consider carefully the scope of the proposed Regulation. We said that public service obligations were best met within an efficiently functioning competitive market, as the final version of the DTI study of the UK's experience (copies of which were distributed) demonstrates. We supported the general agreement that the Florence and Madrid processes were useful and that they should continue but within a more formal legal structure. The UK also supported the widespread agreement that Trans-European Energy Networks (TENS) should be exploited further to help solve potential network problems.

In addition, the council resolution on a strategy for integrating environmental aspects and sustainable development into energy policy was adopted without discussion. The council also noted Commission presentations on a new proposal for a Directive on energy performance of buildings, enhancing Euro-Mediterranean Co-operation, the Northern Dimension: Energy Sector, and the Energy Charter Treaty.

On industry, the council held a debate on the proposed modernisation of the application of the treaty's competition provisions. There was good support for the principle of the reforms, although some caution over legal certainty of the role of competition authorities. There was general support for measures on structural remedies and, for allowing the Commission to accept commitments. Structural remedies allow authorities to remove the underlying incentive for companies to breach competition law, while the proposed regulation contains provisions which would make legally enforceable companies' commitments to the Commission to change practices in order to avoid a potential infringement. The Commission also presented its latest annual report on Competition Policy.

There was a discussion on the Commission's White Paper on Chemicals. The council stressed the need to maintain competitiveness in a global industry as well as protect public health and the environment, and the need for a cost effective, transparent and flexible regime. The council highlighted the need to use the dossier to reinforce the internal market; the importance of compliance with WTO rules; and the importance of producing a system that promoted innovation. The Presidency undertook to pass these messages to the Environment Council.

The Commission presented its fourth report on the world shipbuilding market, which indicated that the past year had seen significant growth in new ship orders, mostly to the benefit of South Korean yards. There was continued evidence of Korean yards selling below an economically viable level. The Commission had announced (on 8 May) that failing a bilateral solution with Korea by 30 June, it intended to launch a WTO case and to propose a selective subsidy mechanism to defend EU yards. A defence mechanism should be seen as an exceptional step, and that it was important that it should be carefully targeted on those sectors where there was direct unfair competition from Korea. The council adopted conclusions strongly supporting the intention to launch a WTO case and noting the intention to propose a new subsidy mechanism.

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The council adopted conclusions welcoming the Commission's "Go-Digital" initiative, designed to increase awareness among SMEs of e-commerce and break down the barriers that exist to their take-up of e-business.

There was a discussion on the proposals to allow European Coal and Steel Community funds to transfer to the Community when the Treaty expires in 2002. Member states had agreed at Nice to a protocol to provide a legal base allowing the ECSC assets to continue to be used for research to benefit those companies who had contributed to the assets. The protocol needed to be ratified as part of the Nice package before formal decisions could be taken, but the Presidency had taken work forward on some outstanding issues.

Most outstanding issues were resolved at the council: apart from a Danish Parliamentary Scrutiny reserve, all member states were able to support the texts. The Commission also presented its latest report on the monitoring of the Article 95 Steel Aid Cases.

Finally, the council adopted conclusions on the integration of sustainable development and enterprise policy. This recommends progress towards the integration of environment policy into enterprise policy, and that a positive environmental approach could reinforce competitiveness.

Embedded Generation

Mr. Gareth R. Thomas: To ask the Secretary of State for Trade and Industry what plans she has to take forward the recommendations of the Ofgem/DTI working party on embedded generation published in January 2001; and if she will make a statement. [1109]

Mr. Wilson: The report of the embedded generation working group set out a number of important recommendations which the Government are keen to see progressed as quickly as possible. I therefore intend to establish a co-ordination group to ensure that the detailed recommendations of the report, many of which are for Ofgem and the industry to pursue, are addressed in a timely and co-ordinated fashion which recognises the interdependent nature of the issues involved. It is hoped that the co-ordination group can begin its work in September and preparatory work is in hand to enable the group to move quickly once it is established.

The DTI Energy Policy Directorate designated embedded generation website at egwg/index.htm will continue to publish information on future developments as the group is established.

Cleaner Fuels

Mr. Gareth R. Thomas: To ask the Secretary of State for Trade and Industry what research she is supporting into less polluting fuels. [410]

Mr. Jamieson: I have been asked to reply.

The Government support a wide range of research into cleaner fuels.

The Department of Trade and Industry spent £11.3 million last year and has a budget of £18 million for this financial year for its programme to support research

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and development of new and renewable energy. This includes work on stationary and transport applications of fuel cells including consideration of the fuelling issues.

Following the results of the Green Fuel Challenge announced in Budget 2001, the Government will shortly invite bids for duty exemptions or reductions for pilot projects for fuels including hydrogen, bio-ethanol, methanol and biogas.

The Government are fully engaged in international developments in this area, and actively involved in research sponsored by international organisations, such as the European Commission and the International Energy Agency.

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