A fragmented market on the way to harmonisation? EU policy-making on renewable energy promotion

Abstract

This article focuses on the directives of the European Union on the promotion of (1) electricity produced from renewable energy sources (the RES-E Directive) and (2) the use of biofuels and other renewable fuels for transportation (the RF Directive). First an overview is given of the broader policy perspectives and the political process that led to their adoption. Next these directives are briefly described and an assessment is made of their implementation. This sets the stage for a contribution to the debate on whether or not further steps to EU-wide harmonisation of national renewables support systems should be made. This debate is quite relevant to the drafting of the evaluation report by the European Commission on the implementation of the RES-E directive due in October 2005. Some major near-term priorities for implementation of the RES-E and RF Directives are identified. It is argued that requirements for the emergence of a single energy market, improvement of the international competitiveness of the EU economy, and accelerating cost-reducing innovations in the renewables-related industries all point in the direction of Union-wide harmonisation. This approach should allow, though, for technology-specific cost considerations. However, an EU-wide choice for one specific type of support scheme might not be realisable in the near term. A first step in reducing market fragmentation could be compatible accounting systems for guarantees of origin (GOs), which consequently may assume a key role in facilitating trade.