Description of sector

This paper covers the wholesale gas market, the gas transmission and distribution networks and the retail market.

The current EU regulatory regime
Main sector-specific rules governing the provision of this activity in the EU

The Internal Energy Market (IEM) provides a technical framework for the transmission, distribution and efficient trading of electricity and gas; transparency to ensure fair access to others’ networks; a regulatory co-operation mechanism; and measures to ensure security of supply and to deal with energy shocks.

It is a long-term project to liberalise and integrate the energy markets of individual EU Member States. The IEM also facilitates the fair trading of electricity and gas across the EU, enabling new gas and electricity suppliers to enter EU Member States’ markets, and domestic and industrial consumers to select their own suppliers. It is being reformed (through the European Commission’s proposals on a new electricity market design) to better facilitate the integration of low carbon energy sources. The UK has been a leading advocate for the development of the IEM and has heavily influenced the EU-wide rules, which draw on UK practice.

The legal basis of the IEM is Article 194 TFEU. EU energy policy is predominantly set out through Regulations, which are directly applicable, and through Directives,which require domestic transposition. There is a significant amount of technicallydetailed tertiary legislation, known as network codes and guidelines, which take the form of Commission Regulations.

Competence under the energy legal base (Art 194 TFEU) is shared, as stipulated in Article 4(2)(i) TFEU, although the EU has exercised its competence in many areas of energy policy. The relevant legal framework recognises some areas where Member States continue to be able to adopt domestic measures. For example, both the Electricity Regulation (714/2009) and the Gas Regulation (715/2009) provide that the requirements to develop network codes (Commission Regulations), to address crossborder network and market integration issues, are without prejudice to Member States’ right to establish national network codes which do not affect cross-border trade.

Areas of devolved responsibilities or issues relating to Gibraltar, the Crown Dependencies or Overseas Territories

Energy policy is devolved to Northern Ireland, but largely reserved for Scotland and Wales. The Internal Energy Market legislation does not apply to Gibraltar, or the Crown Dependencies, or the Overseas Territories.

The Scottish Government has stated, in discussions with UK officials, it would like to see the maintenance of full access for Scottish businesses of the benefits of the Internal Energy Market, the UK remaining part of EU-wide solidarity mechanisms,continued benefits from greater security alternatives offered by interconnection and the continued integration and interconnection of gas, electricity and hydrocarbon markets and infrastructures, and the continued free movement of labour that in their view is vital for energy engineering, offshore oil and gas and research collaboration.

This includes maintaining access to EU funds to support R&D and energy infrastructure investment.
In addition, the Scottish Government would like to see the UK remaining part of EUwide solidarity mechanisms in the event of acute supply crises; continuing to benefit from greater security alternatives offered by interconnection; and retaining power of EU collective bargaining with third parties.

Existing frameworks for how trade is facilitated between countries in this sector

The arrangements described in this section are examples of existing arrangements between countries. They should not be taken to represent the options being considered by the Government for the future economic relationship between the UK and the EU. The Government has been clear that it is seeking pragmatic and innovative solutions to issues related to the future deep and special partnership that we want with the European Union.

It should be noted that there are various global frameworks for trading oil and gas products (these are covered in other reports). CETA, for example, sets tariffs on most oil and gas products to zero (but a 0.7 per cent tariff could be applied for natural gas in liquid and gaseous form (bound rate), with no quotas, and temporary entry for service providers.29 The EU import tariffs are generally low for imported energy products.

Non-EU countries looking to export products into the EU will need to comply with EU Ecodesign and energy labelling standard requirements. Such products may be subject to customs controls to ensure compliance. In some cases, (e.g. with the voluntary US ‘energy star’ labelling scheme for office equipment), the EU has existing agreements in place with non-EU countries to ensure their mutual recognition with EU standards.

There are also some small tariffs in place for environmental goods. The EU is party to the WTO’s discussions to agree a new Plurilateral Environmental Goods Agreement which aims to remove tariffs on a wide-variety of these goods.

There are some references in EU Energy legislation to trading with third countries; for example in the Capacity Allocation Mechanisms Code (Commission Regulation 2017/459) and in the IGA Decision requiring Member States to notify the Commission of planned gas agreements with third countries. The EU has a close relationship with EEA and EFTA state members, particularly where EU legislation is EEA and EFTA relevant. In the gas sector Norway is a key partner for the EU as it provides over 20 per cent of Europe’s gas needs.

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