Workshop 05: Regional Energy Initiatives: Medreg and the Energy Community
Abstract
Societies and markets around the world are progressively more integrated as a result of lower transport costs, faster communication tools and reduced barriers to trade. The process of increased social and economic integration, also known as globalisation, has been a powerful source of growth and reduction in poverty. From an historical perspective the Mediterranean area has been a natural location for intense trade and has represented a strategic arena for social, economical, political and institutional reasons. In the same line, during the socialist period Yugoslavia was the most developed and the largest country in South East Europe (SEE), but the wars that took place in the 1990s, have significantly disrupted trade in most of the SEE countries. Nowadays, because of the war legacies, the countries from the Western Balkans have common needs related to investments in the public infrastructure; needs which exceed the domestic financial resources. The existence of a common past and geographical proximity alone is not enough to qualify, the Mediterranean basin and the Western Balkans as regions. A region is not a mere geographic area. It should have a well developed and sustainable institutional structure in order to fulfill its primary function - to address political and economic problems before they escalate to global concerns. Energy markets are not exempted from these dynamics, and actually play a crucial role in the context of regional integration. This workshop will focus on the institutional dimension of two intra-regional initiatives created for development and integration of energy markets: the Energy Community (EnC) and the Association of the Mediterranean Regulators for Electricity and Gas (Medreg). The EnC and Medreg, apart from their common strategic role in providing a much needed stable regulatory environment for energy markets in their respective reference countries, represent examples of a diverse institutional approach. The former is initiated by external actors and is an example of a top-down approach, whereas the latter is a voluntary bottom-up initiative of the countries involved. The difference as to how institutional frameworks are built is not without consequences on the functioning and organization of these two regional initiatives. We propose to discuss and evaluate these different approaches and their consequences in the framework of the development of the Energy Community and Medreg, with particular reference to their impact on regional integration, energy policy and institutional change.
Description
Background information: Medreg and the Energy Community:
Medreg
The Mediterranean area is often referred to as a region. This is legitimate when the Mediterranean is considered as a geographical space. On the other hand the political, economical, and cultural homogeneity of the Mediterranean is more difficult to assert. Aliboni (2000) has pointed out some of the features that have prevented the Mediterranean from developing a higher level of political, economic, social and cultural integration. Firstly, the political and cultural centres of the Mediterranean are located elsewhere, transforming the Mediterranean in a border and not in a centre in itself. Secondly, Mediterranean countries have very different economic, political and institutional regimes and the difference is particularly visible between the countries in the north and in the south of the Mediterranean basin. Finally, the area is highly penetrated by external political/institutional actors due to its political and economic relevance.
In this context Medreg represents a change of perspective compared to other previous experiences in the energy field. As a result, because of its origin, deeply rooted in the political and cultural centres of the Mediterranean, it represents a joint effort of 20 countries of the area. Medreg is aimed at enhancing the development and the harmonization of the regulatory framework in the area, in order to gradually reach integration of the energy markets. Medreg also promotes exchange of know-how and expertise in the field of energy regulation to the benefit of its members and to promote the overall welfare of the Euro-med area.
Acknowledging the complex historical background of the Mediterranean region, Energy Regulators have a central role to play in promoting a “bottom-up” process. Faced with strategic energy challenges as it is, the Association of Mediterranean Energy Regulators (MEDREG) is to constitute a strong institutional basis to address economic, social and cultural development issues, as well as the need to conciliate a rising energy demand with sustainable development conditions. On December, 17 2007, in Limassol, EuroMed Energy Ministers acknowledged the essential role of Energy Regulators for the implementation of the Priority Action Plan agreed for 2008-2013:
1. to guarantee greater harmonization of the energy markets and legislations and to seek
progressive market integration in the Euro-Mediterranean region;
2. to foster sustainable development in the energy sector and
3. to develop initiatives of common interest in key areas such as infrastructure extension, investment financing, research and development.
Medreg was founded in 2006 with the primary aim of elaborating proposals for the development, harmonization and integration of Mediterranean energy markets and of promoting the exchange of know-how and expertise in the field of energy regulation. In November 2007, in the occasion of its fourth General Assembly held in Rome, Medreg was turned into a permanent Association. The Constitutive Act was signed by the following countries: Albania, Algeria, Bosnia-Herzegovina, Croatia, Cyprus, Egypt, France, Greece, Israel, Italy, Jordan, Malta, Montenegro, Morocco, Palestinian Authority, Portugal, Slovenia, Spain, Tunisia and Turkey.
The emphasis of the regional cooperation between the Mediterranean countries is therefore on the promotion of a number of common basic rules and activities that should be able to escalate in a greater integration of the market “by diffusion.” The regulatory framework within Medreg countries is not imposed, but discussed and evaluated in the light of potential mutual gains and possible (prospective) complementarities between diverse countries (exporting vs importing countries) and regulatory frameworks (liberalised market vs vertically integrated monopolistically organised one).
Medreg strategy is to analyse the existing regulatory institutions and rules within members’ countries in an attempt to highlight possible harmonisation strategies and road maps for convergence.
The Energy Community:
The Athens Process has been launched as a top-down initiative by the European Commission with the support of the Stability Pact proposing the creation of a SEE Regional Energy Market (REM) to be eventually integrated into the EU energy market. After signing the Athens Memoranda of 2002 and 2003, the Treaty establishing the Energy Community (EnCT) between the European Union on the one hand, and its nine partners in SEE on the other was signed on 25 October 2005 and it entered into force on 01 July 2006.
The Western Balkans countries that initially signed the EnCT are: Albania, Bulgaria, Romania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia, as adhering parties, and, Kosovo through the United Nations Interim Administration Mission in Kosovo (UNMIK), pursuant to the United Nations Security Council 1244. They all have a clear perspective for EU membership and are part of the Stabilisation and Association Process (SAP). Since 01 January 2007 Romania and Bulgaria became full members of the EU and have changed their legal status from Contracting Parties to Participants to the EnC. Recently, the EnC has been enlarged for the first time to countries outside the Western Balkans which are part not of the SAP, but of the Commission’s European Neighbourhood Policy (ENP). In particular, as from 01 May 2010 Moldova, and from 01 February 2011 Ukraine have become its full members.
The initial idea of the EnC was the establishment of a SEE REM that would become integrated into the EU internal energy market even before the Contracting Parties become Member States of the EU. Therefore, the Contracting Parties, unlike the Medreg countries, do not have freedom in choosing the reform of their energy sectors. In fact, they are required to follow the EU model of liberalization and to adopt all the relevant EU acquis in the field of energy, competition and environment. They shall furthermore restructure their energy sectors, liberalise them and establish institutional and regulatory framework compatible with that one of the EU Member States.
According to the ambitious EnCT binding targets, opening of the markets to all nonhousehold customers was due by 2008 and to all household customers, by 2015. After five years since the EnCT has been signed, great progress in the liberalization of the national energy markets and their regional integration can be noted. Nevertheless, a lot of work remains to be done before the SEE REM becomes fully functional and before it becomes integrated into the EU internal energy market thereby developing the Pan-European energy market, which is the final goal of the EnC.
Even though initially the EnC was one of the many regional initiatives that the EU has launched for the SEE countries in the framework of the SAP, the Commission developed the message that the aim is to extend it gradually in order to become a Pan-European Energy Community.1 Thus, it welcomes even further enlargement of the EnC to other partners 1 European Commission, Green Paper COM (2006) 105 final, 08.03.2006 at 16. besides Moldova and Ukraine that are part of the ENP,2 and that unlike the initial Contracting Parties, do not have a clear EU membership perspective. Moreover Turkey as an active participant in the process has a status of observer and has formally applied to became full member of the EnC.With the enlargement, the importance of the EnC for the EU external energy policy in its relations with its trading partners has been certainly strengthened. It shall be noted moreover, that not only some of the EnC countries belong to the SAP and to the ENP, but also some of the countries in question are part of the two initiatives Medreg and the EnC, to which the workshop will focus.
Aims and rationale of the workshop:
The workshop will mainly focus on energy policy developed by the two different approaches undertaken by the EnC and Medreg (top down vs bottom up). It is of foremost importance to evaluate and emphasise the relevance that the two different regional initiatives might have in promoting regional integration and institutional change.
Regional integration in the Mediterranean have been mainly dominated by a generic and vocal expression of interest in the development of an EU coordinated energy policy in the Euro Med area, trough, among other things a <<comprehensive Africa-Europe Energy partnership>>3, as stressed in the Commission’s 2007 “Strategic Energy Review” and a number of bilateral cooperation agreements, mostly devoted to technical assistance that has produced limited results. Unlike the bottom-up approach and the cooperation deriving from the voluntary agreement of the countries in the Mediterranean area, the regional cooperation in the field of energy developed through the Athens Process and the establishment of the Energy Community is a top-down approach. The regional cooperation between the SEE countries and the establishment of a SEE REM is one example of a regional initiative launched by external actors that is developing overtime to an initiative with regional ownership. This workshop shall address the positive and negative sides of voluntary regional cooperation vs regional cooperation imposed from outside and stimulated by external incentives, and shall evaluate the success of both initiatives.
The energy policy could play a significant role in the material development of the Euro Med area, pulling together exporting, importing and transit countries in order to benefit, significantly from their respective role and from major investment opportunities that a deeper integration could offer. On the other hand, the Contracting Parties of the EnC are required to follow closely the EU model of energy markets liberalisation. The EnC is an example of export of the EU energy policy and regulatory strategies to third countries. The workshop aims at discussing the pros and cons of developing a tailor made voluntary energy policy as in the Medreg case on the one hand, and the export of an energy policy developed for developed countries such as the EU Member States to emerging economies such as the Contracting Parties of the EnC, on the other hand.
Market integration presupposes a modification of the social, economic, political and even merely technical norms that constitute the playing field where energy policy is operated. A convergence between the rules and in particularly the regulatory framework in place in the Medreg countries is desirable (if not necessary) in order to make the transition toward a harmonised system possible. In turn, this implies that the institutional structure with which 2 See: European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Energy 2020, A strategy for competitive, sustainable and secure energy, COM(2010) 639 final, Brussels, 10.11.2010 at 16.3 Commission of the European Communities, An Energy Policy for Europe, COM(2007)1 each country is endowed should be compatible, or able to change in a way that could converge to an institutional interface able to accommodate the various regulatory frameworks existing in the region. Alternatively, what is desirable and recommendable for the Medreg countries, is required and expected from the Contracting Parties of the EnC. By signing the legally binding EnCT, the later are obliged to adopt and implement the EU acquis and to follow the EU model of liberalisation. The workshop has an objective to discuss in more details the advantages and disadvantages of both the Medreg and the EnC approach. One of the specific aims of this workshop is to study the institutional characteristics conductive to a more cohesive regulatory framework.
Approach:
The workshop will undertake a comparative approach and will focus on identifying and analysing the issues that the EnC and Medreg have in common, as well as the differences in both initiatives. Multidisciplinary approach is considered necessary in order to address the development of regional cooperation and integration in the energy field in both regions.
In particular, taking into consideration that there is a political background behind both initiatives, contributions from the political scientists are welcomed, in order to discuss about the outcomes of both policies.
The relationship between the countries belonging to the EnC and the Medreg with the EU could be approached from a political science, but also from a legal perspective, by analyzing the cooperation in energy in the framework of the SAP and the ENP as two different EU policies. Moreover, the top-down vs bottom-up development of the legal framework in order to facilitate the regional cooperation and integration shall be approached by legal experts in the energy law field.
Finally, the changes in the market structure as well as in the institutional and regulatory framework call for an economic study and examination.
Potential participants:
The potential participants of the Workshop are lawyers, economists and political scientists from the EU Member States, SEE and the Mediterranean countries, working on topics related to energy and regional integration in these countries. The workshop is open to academics, staff of energy regulatory authorities, international organizations or utilities.
References:
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http://www.ciaonet.org/wps/air08/air08.pdf
(8 October 2004).
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- KAROVA R., (2010) The Energy Community: Regional Ownership of an Integration Initiative in South East Europe, pp.313 - 342. in Cerovic Božidar, Uvalic Milica (eds.), Western Balkans' Accession to the European Union. Political and Economic Challenges, published by the Faculty of Economics of the University of Belgrade - Publishing Centre, 2010, ISBN 978-86-403-1100-7
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Page last updated on 04 September 2018