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EU calls for new low-carbon power revolution as it seeks to cut oil imports

January 9 2007 – The European Union will call for “a new industrial revolution” on Wednesday as it tries to rein in oil imports and slash the carbon emissions blamed for global warming. In a draft paper the European Commission says the days of secure, cheap energy for Europe are over.

Surging world demand for limited stocks of oil and gas has sent prices higher. The EU executive said Europe has to look at alternatives: using more renewable energy such as wind power and biofuels.

It also suggests that current plans to cut back nuclear power – which it calls “one of the cheapest sources of low carbon energy” – will endanger the goal of curbing greenhouse gas emissions.

Electricity generation will be “heavily dependent” on natural gas, it said, warning a number of countries reliant on one main supplier that they should diversify.

The EU said it is confident that relationships with oil and gas suppliers Norway, Russia and Algeria will strengthen but also that it needs to open up a range of sources, suppliers, transport routes and methods.

European concerns about the reliability of Russian supplies were underscored Monday when shipments of oil via a pipeline running through Belarus were disrupted by a trade dispute between the two former Soviet republics.

Germany and Poland said earlier Monday Russian supplies had been halted, and Russia accused Belarus of siphoning off oil destined for Europe since the weekend.

Russian state pipeline operator Transneft said Belarus, which is furious that Russia is demanding it pay new oil duties, had diverted 79 000 tonnes of oil so far.

In an effort to diversify supply, the EU plans to start negotiations with Turkmenistan and Uzbekistan, build on agreements with Azerbaijan and Kazakhstan and cement relations with Turkey, Egypt and other nations, including Libya “if possible,” it said.

It will also explore bilateral pacts with the Gulf state of Qatar and energy exporting nations in the Caribbean and Latin America, it said.

The world also needs to make a global effort to cut energy use, it suggests, proposing an energy efficiency agreement for industrialized nations plus China, India and Brazil to be signed at the Beijing Olympics in July 2008.

Supply uncertainties mean the EU has to rely on power in its own backyard, boosting renewables and making clean coal technology a reality.

The EU executive suggests setting a new target – no figure appears in the draft – for renewable power by 2020, with a binding target for biofuels to replace oil in vehicles. It says that biofuels could take up 14 percent of that market by 2020.

“Major investment” in renewable energy is needed to create the economies of scale that would make it viable, it said, acknowledging that many EU nations will fail to make existing goals to draw 12 percent of all EU energy from renewables by 2010.

Vast amounts of money also need to be pumped into Europe’s electricity network with some €900 bn euros ($1.17 trillion) needed just to provide more power generation alone in the next 25 years as demand grows.

The EU recognizes serious problems with the way the electricity and gas markets work, highlighting the control huge energy companies have over production and sales. These issues will be detailed in a parallel report from EU antitrust regulators on Wednesday.

It said these market problems are causing governments to cap power prices, leading to less investment in the sector that could cause future supply crunches. “This situation cannot continue,” it warns, saying it believes a series of measures need to be taken to create a competitive market within three years.