Watching Government EU's drive to standardize policy

With Patrick Crow from Washington, D.C. Two recent developments underscore the European Union's determination to standardize energy policy. In one move, EU proposed to phase out leaded gasoline from the market by 2000 in most of its 15 member countries and by 2002 in nations with older auto fleets. And, after years of negotiations, EU energy ministers recently agreed to open their countries' electrical power markets to competition .

July 1, 1996

3 min read

Two recent developments underscore the European Union's determination to standardize energy policy.

In one move, EU proposed to phase out leaded gasoline from the market by 2000 in most of its 15 member countries and by 2002 in nations with older auto fleets.

And, after years of negotiations, EU energy ministers recently agreed to open their countries' electrical power markets to competition .

Lead phaseout

The lead phaseout program would reduce the levels of benzene, sulfur, and aromatic compounds in gasoline. For instance, sulfur limits for diesel would go from the current 450 ppm to 350 ppm and sulfur in gasoline from today's 300 ppm to 200 ppm.

Any nation with severe pollution problems in major cities could impose tighter standards.

EU estimated the fuel proposals would cost the refining industry $956 million/year. That undoubtedly will put more pressure on marginal refineries, leading to more closures and consolidations.

The fuel proposals were part of a larger EU plan to reduce auto emissions 70% by 2010.

EU also proposed a package of standards for auto manufacturers, designed to reduce pollution from passenger car engines. It will be effective with model year 2000 vehicles. Similar standards will be proposed in a year for vans and trucks.

Electrical power

Upon European nations' approval of the electrical power plan next January, a three stage process will begin toward competition. Initially, the program will allow large industrial users, or about 23% of the market, to buy power from firms other than state monopolies. That slice of the market will jump to 27% in 2000, then 32% in 2003.

In January 2006 the member nations plan to review the power market directive and consider future measures.

Member countries will be able to determine which "eligible clients" can buy electricity from the supplier of their choice.

EU officials think the power market restructuring will work to reduce prices for all customers.

The deal required some compromises. Belgium and Ireland were given an extra year and Greece 2 extra years to implement the directive.

France demanded and won a concession allowing it to restrict its number of eligible clients and to retain Electricite de France's monopoly on transportation and distribution.

EdF's unions have opposed changes that would weaken the monopoly and have threatened strikes and brownouts.

Some observers think EdF's future depends on its ability to retain its largest customers such as chemical groups Elf Acochem, Rhone-Poulenc, and Solvay.

Although EU's power market initiative was scaled back sharply from initial proposals, it may serve as a roadmap for equally difficult talks on permitting more competition in the European natural gas market.