The document is a letter from the Netherlands government responding to the European Commission's Green Paper on a European strategy for sustainable, competitive and secure energy. It agrees with the main objectives of the strategy to promote sustainability, competitiveness and secure energy supply. It supports the priority issues identified in the Green Paper and provides more detailed comments on each issue, including promoting open energy markets, ensuring energy supply continuity between member states, diversifying energy sources, addressing climate change through energy efficiency and renewable energy, and developing a common external energy policy.

1. MINISTER VAN ECONOMISCHE ZAKEN
VICE-MINISTER-PRESIDENT
The Hague, 29 June 2006
ET/CSI / 6046294
Dear Mr Piebalgs,
On behalf of the Netherlands government, I would like to expand upon the conclusions of the
European Council of 23 and 24 March 2006, by making the following observations with regard to
the Green Paper on “A European Strategy for Sustainable, Competitive and Secure Energy.”
I share the analysis put forward by the Commission that structurally higher oil prices, the growing
dependency of the EU upon imports and the fast pace of the energy markets require a truly
European response in the form of a European strategy. Within Europe itself, a strong energy policy
will be essential in order to exploit the benefits of the European energy market to the full. In its
dealings with the rest of the world, Europe must speak with one voice in order to guarantee
sufficient supplies and in order to ensure that this is not achieved at the expense of the environment
or to the detriment of development opportunities worldwide.
A strategy such as this is highly feasible within the limits of national control of Member States with
regard to the implementation of the fuel mix, national sovereignty with regard to mineral resources
and of course the principle of subsidiarity.
The Netherlands government agrees with the main objectives of such a strategy (which also
correspond to the objectives of our own national policy) involving sustainability, competitivity and
a secure energy supply. The Netherlands is in favour of a European energy policy that results in
measures that wherever possible, fulfil several objectives at the same time. In the long term, the
Netherlands is working to achieve a sustainable energy balance that guarantees the energy supply,
that is less dependent upon oil and gas and that gives rise to fewer emissions, so as to achieve its
long term objectives with regard to the climate and to air quality. This should be achieved entirely
within a fully functional internal energy market.
We are in agreement with the choice of the six priority issues. You will find a more detailed
response to each of those below.

2. 1) Working towards open and competitive energy markets.
A fully open, effective and transparent internal European market for energy is of paramount
importance. It is important in order encourage competitivity and in order provide security of supply
(an efficient market will of course also contribute to the achievement of a secure supply). Within
the framework of existing legislation, there are many things that can be improved. We are also
looking forward to the outcomes of the Commission’s study into the implementation of existing
guidelines and ordinances, both with regard to the letter as well as to the spirit of those. Effective
unbundling of transmission and distribution is a particularly important factor in this regard. In the
Netherlands, unbundling of the ownership of the transmission networks has taken place. The Lower
House of the Dutch Parliament recently approved a draft law that provides for the compulsory
splitting of distribution networks. The networks will remain in official hands (as far as the
distribution networks are concerned, these are provinces and local authorities). In order to achieve a
level playing field within Europe, it is important that other Member States also develop this
effective method of unbundling. The Lower House of the Dutch Parliament has asked me to enter
into consultation with the European Commission, in order to examine whether a “principle of
reciprocity” can be introduced, so as to prevent the level playing field from becoming affected by
the unbundling of ownership.
Equally important is the improvement of collaboration between network managers and supervisory
authorities in Europe. The Netherlands has already started out down this particular road, in the
context of our initiative regarding the electricity market in North-Western Europe. This is also the
reason for our hesitancy with regard to the notion of introducing new institutions in the form of a
European supervisory body or a European Centre for Energy Networks. This does not however rule
out the possibility that new types of organisation may be created in the future, following more
intense collaboration.
Interconnection forms an important pre-condition, if the internal market is to be achieved.
Compiling a priority interconnection plan, in which the strategically most important connections
are indicated, may help in this regard. This plan must also examine how connections with
neighbouring countries can be improved. The starting point must of course remain that the
necessary investments must be financed by the network companies themselves.
The Commission is also carrying out sectoral studies of the energy markets. The Netherlands shares
many of the concerns that have been expressed in the interim report. I do however believe it
necessary to achieve a balanced regime in relation to long-term contracts, so as to reinforce
competition with the European market, whilst at the same time maintaining the incentives to
investment and benefiting the security of supply.
Though it puts forward no concrete suggestions, we value the attention devoted in the Green Paper
to the needs of energy-intensive industry. In the Netherlands, energy-intensive industry has been
confronted with sharp rises in energy prices. As a reaction to this, many energy-intensive
companies have got together in a consortium in order to purchase electricity on a joint basis. This
takes the form of commercial negotiations between the consortium and various electricity producers
with regard to new contracts. The negotiations are now at their final stages. There must be scope for
commercial negotiations of this type to take place.
2) An internal energy market with guaranteed continuity of supply:
solidarity between Member States
In this regard, the Green Paper proposes a European energy supply monitoring post that follows the
supply and demand on energy markets within the European Union, including the necessary
infrastructure. We can imagine that the Commission will wish to expand its own expertise in this
regard. Such knowledge is essential when formulating policy. I subscribe to the necessity, as is
stated in the Green Paper, of close cooperation with the International Energy Agency, which fulfils
a similar task on a worldwide scale. This would prevent reinventing the wheel.
The Directive governing the security of the gas supply took effect in May of this year and is

3. providing greater transparency and additional measures. In addition to this, it is necessary to
ascertain whether, under current conditions, the Directive still provides an adequate response to
crisis situations and whether all facilities have been exploited sufficiently. The prime objective
must be the achievement of a healthy gas market. The Green Paper refers to the possibility of new
proposed legislation governing gas supplies. I would however wish to advise that we do not too
easily draw a parallel in this particular area with our policy with regard to the oil crisis. After all,
storing gas is many times more expensive than storing oil, which means that a careful analysis of
the costs and benefits then becomes an absolute necessity. Furthermore, creating gas reserves is
only one of the possible methods of achieving the required degree of flexibility. I refer in particular
to the possibility of building in flexibility (with a price card) into supply contracts.
3) Towards a more sustainable, efficient and diversified energy mix.
As far as the security of energy supply, competitiveness and the environment are concerned, an
intense debate as to the benefits of the various energy forms, from oil and gas to nuclear energy and
sustainable energy is highly appropriate within the EU. Such a debate may be based on the strategic
evaluation of the energy situation, as announced by the Commission. Certainly, if this strategic
evaluation were based upon the results of the aforementioned monitoring post, this would
contribute to what the European Council referred to in its conclusions as “shared general
orientations”. This will also help Europe to “speak with one voice”, as referred to under item 6.
Based upon the current Green Paper, I do not yet see any benefits in the so-called general European
strategic objective. An example referred to in the Green Paper involves a minimum proportion of
fuels derived from safe areas or generating low CO2 emissions. Given the dominance of fossil fuels
and the depletion of our own stocks, the EU is becoming ever more dependent upon imported oil
and gas. It is important for each Member State to approach this issue sensibly, by diversifying
suppliers and by diversifying fuels. The differing energy situation in each Member State of course
also forms a major factor, as it stands in the way of the introduction of a (compulsory) European
standard. This does not detract however from the fact that the Netherlands subscribes to the targets
for items such as sustainable energy and is also of the opinion that the diversification of fuel types
and countries of origin are both important factors.
4) An integrated approach towards climate change
This section quite rightly demands that attention be paid to energy-efficiency, sustainable energy
and the capture and storage of CO2.
Promoting energy-efficiency will contribute to all three policy objectives. The Netherlands has
already drawn up an action plan in the light of the energy report entitled “Nu voor later” that was
published in 2005.
The Netherlands is aiming to achieve greater energy savings of 1.3% from 2008 to 1.5%, and
higher, if possible, with effect from 2012. The savings shall, for the most part, be required to come
from industry, the energy sector and the built environment. We are all too aware that we cannot
approach the problem on a national level alone. A European approach is a necessity, particularly
when it comes to developing efficiency standards for household appliances and as far as
transportation is concerned. A European approach could perhaps be developed, for example, as a
result of the implementation of the Framework Directive for ecodesign. We give priority to
standards relating to energy-efficiency and the consumption of electricity by televisions on stand-
by, electrical motors and standards for cars and vans. European agreement is also needed in order to
give renewed impetus to the use of efficiency labels.
We are therefore looking forward to the energy-efficiency action plan announced by the
Commission and wish to make a case for its implementation on an ambitious scale.
With regard to sustainable energy, attention should primarily be devoted to making the application
more cost effective. In many cases, additional technological developments are required. A possible
objective for the implementation of sustainable energy must also be regarded in that light. Such an
objective needs to be ambitious in its scope, but at the same time be set far enough into the future

4. so as to enable the technological developments to take place. An objective that lies too immediately
in the future (such as for 2015) may well give rise to an increase in the volume of sustainable
energy generated, but will result in such energy being generated using less efficient technologies,
such as those that are available at present. My preference would be for a substantial objective, set
for a date such as 2025 that would involve compulsory cost reductions and technological
development.
I welcome your intention to devote attention during this autumn’s Forum on Sustainable Energy
(otherwise known as the Amsterdam Forum) to the new EU objectives for sustainable energy after
2012.
Based upon the action plan submitted, the Commission’s approach with regard to biomass, has our
full support. Attention should particularly be paid to developing technology in order to make more
efficient use of the available biomass, whilst at the same time benefiting more substantially from
CO2, partly as a result of further harmonisation of the various policy instruments. It will also be
necessary to focus upon the “sustainability” of biomass. Consultations are currently underway in
the Netherlands between the business sector and NGOs, in order to arrive at more detailed
agreements to this end.
The Netherlands is in favour of paying greater attention to the capture and storage of CO2 within
the European Union. It also favours the rapid creation of a uniform settlement within the European
emissions trading system. The EU is also in a position to encourage large-scale demonstration
projects and to commission a study into the long-term, quantitative targets for CO2 storage. It is
also important that an unequivocal and legal framework be enacted in each Member State.
As far as this particular topic is concerned, I believe that the Green Paper does not address the need
to make improvements to the emissions trading system. You will not be amazed to hear that the
Netherlands is in favour of the continuation of the system, after 2012. But improvements to the
Directive are however needed. First of all, it will be necessary to avoid the possible distortion of the
market, particularly in relation to the energy market, through further harmonisation of new and
existing installations. At the same time, the free allocation to the electricity sector must be limited,
in order to reduce so-called “windfall profits.” In view of the necessity to introduce ambitious
climate objectives for the European Union for the period up to 2012, companies that are currently
considering making investments should be encouraged to invest in CO2 reduction. In order to
achieve this, it will first of all be necessary to determined as rapidly as possible the allocation rules
for the period after 2012. These rules may anticipate the determining of the total allowance for
emissions in the EU for the period following 2012.
An approach such as this would also benefit the security of supply, as coal-fired power stations
with CO2 storage and nuclear power stations (technologies that also reduce the dependency upon
imports) would then be aware that CO2 storage and CO2-free production represents a financial
value. The Netherlands is also in favour of extending the emissions trading system to other sectors
(aviation, shipping) and to other gases (such as N2O).
5) Encouraging innovation: A strategic plan for European energy technology
We support the idea of achieving the aforementioned strategic plan for the further development of
promising technology and then promoting the introduction of this technology to the European
market. Within the context of the improvement of market perspective, the Netherlands has on a
number of occasions argued for the use of financial and economic policy instruments, such as
sustainable tendering by government organisations, tax incentives (such as green investments), the
availability of risk capital, the refocusing of taxation onto environmentally damaging activities and
the abolition of unsustainable subsidies.
It will be essential to devote sufficient attention during the 7th framework programme, but the
energy platforms controlled by the industry itself are also of importance. The plan must also
encourage collaboration between groups of Member States ( with the same choice in fuelmix) and
the Commission into promoting technological developments regarding their own specific energy
mix.

5. In that regard, I would like to draw your attention to the “transition approach” that has been
developed during the past few years in the Netherlands. This approach focuses upon the issues of
new gas and the clean use of fossil fuels, sustainable mobility, the built environment, green raw
materials, chain efficiency and sustainable electricity. In this way, it covers the entire range of
sustainable energy, energy-efficiency and the clean use of fossil fuels. This is also important when
it comes to forming an image of the mutual connections that exist between the issues. With regard
to these issues, industry, the Government, knowledge institutions and NGOs are working together
in platforms, the aim of which is to develop and demonstrate energy innovations for long-term use.
A task force is also in place which acts as an overarching body with regard to these particular
issues. On 8 May 2006, this task force presented an action plan, which details the long-term
objective (a reduction of 50% in CO2 when compared to 1990), the transitional pathways that will
require focus and the opportunities that lie ahead for national industry. The action plan also
indicates where the responsibilities lie for the Government and where other parties must spring into
action. This plan is striking, as it has been put together by market players themselves and because
it charts how it is possible to undertake focused work towards an energy transition, in favour of a
long-term energy supply involving all relevant parties. The Government fulfils a directing role
throughout this entire process. The transitional approach has already given rise to approximately 50
innovative investment projects and countless new coalitions that currently have projects under
preparation. Another interesting aspect is that the approach at national level is to be continued at
regional and at local authority level.
I would very much appreciate it if these types of new approaches that are aimed at mobilising
market players, in new collaborative associations, were to be propagated and facilitated by the EU.
6) Towards a coherent external energy policy
External EU policy must also serve to promote the three main targets of security of energy supply,
competitivity and sustainability.
Security of supply would benefit considerably if a coordinated approach were adopted with regard
to external relations. The developments of the past year tell us that political factors are exerting a
greater influence on the energy markets than they previously did. New players, such as China and
India, are entering the market and are adopting their own approach. Existing good relations can no
longer be assumed to be permanent. Energy policy is increasingly becoming a matter of foreign
policy, both for producer and consumer nations. As a result, this demands an integrated, European
approach.
Only in a European context can we interact and negotiate on an equal footing with the major
players on the energy market. The European Union should be able to play a more prominent role in
this regard, by concluding investment agreements with oil and gas-producing nations and regions.
Such agreements should also include stipulations governing market access. Dialogue with Russia
should also be encouraged once again, now that an inventory of opportunities for collaboration has
been completed. Reinforcing dialogue is something that should not only take place in relation to the
producer nations, but also with regard to the consumer nations. Central to any dialogue is
establishing common interests and concerns.
In this context, I would like to draw your attention to the request of the European Council to the
Commission and High Representative for the Common Foreign and Security Policy to cooperate in
the important area of external energy relations and to contribute to an EU-strategy on behalf of the
forthcoming European Council. External policy must focus more strongly than before upon
securing the European energy supply and should be supported in this by the increased involvement
of the Common Foreign and Security Policy. The key issue should be to encourage stability in
those parts of the world, upon which we depend for our fuels, whilst at the same time creating the
conditions for a stable and secure supply. This also includes the protection energy transportation
routes. In addition, it is also of importance to create a situation in which all consumer and producer
nations continue to play a responsible role in international energy policy.
The European Union must build upon the preparatory work carried out by the Commission and the
High Representative and further develop this external dimension of European energy policy.

6. In this regard, I would point specifically to items such as the importance of access to modern
energy in order to achieve the Millennium Development Goals. Europe’s external energy policy
must make a contribution to this, including by means of the EU Energy Initiative.
We also support the extension of the rules for the internal energy market to our neighbouring
countries, in line with the Energy Community Treaty with partners in South-Eastern Europe.
Particular countries that come into mind in this regard are Turkey and Ukraine, but also Norway,
which also expressed a desire to be involved. Similar developments are also underway on the
southern fringe of the Mediterranean and these also receive our support.
Finally, the Netherlands still does not see a great deal of benefit in a formal, specific instrument that
would be implemented in emergencies relating to the supply of energy. First of all, it was for just
this type of situation in relation to the oil supply that the IEA was set up, whilst in the case of gas,
the specific directive for security of the gas supply was concluded, which I referred to earlier. As
far as an observation post that could provide early warning of a potential external energy crisis is
concerned, this is, in our opinion, precisely the purpose for which the monitoring post referred to
under (2) was intended. However we do support the consultations that are currently taking place
with regard to improved coordination within the EU of measures in times of crisis that have been
agreed within the context of the IEA.
Mr. Andris Piebalgs
Member of the European
Commission