Against All Odds: The Liberalisation of the European Natural Gas Market—A Multiple Streams Perspective

As mentioned before, no common energy policy had been established in the course of European integration until the early 1980s. Basically, this was a result of the member states’ problem perceptions. According to them, the most important issue in the problem stream had been a perceived scarcity of supply. Consequently, the issue of securing supply dominated their agendas (see Eikeland 2004). The perception of scarce supply arose from the belief that finite resources would soon be depleted, which occurred at the same time as forecasts for future high demand (Stern 1992). Apart from this depletion scenario, international focusing events—such as the closure of the Suez Canal in 1956 and 1967 and the two oil crises in the 1970s—fostered the impression that energy security was endangered (see also Alexandrova and Timmermans in Chap. 3 on the role of focusing events for agenda shaping).

As member states preferred to address this problem primarily with national rather than pan-European solutions, the lack of a common energy policy was not perceived as problematic. The politics stream was not ripe either. As a result of the focus on finding national solutions, energy issues were historically to a great extent left to the sole responsibility of member states. Regardless of party-political considerations, they had answered almost unanimously to the perceived scarcity of supply by treating energy as a strategic commodity. As such, it had to be dealt with on the national level without exposing it to competition. Consequently, no political initiative for a common European response stemmed from either national or European actors except for the Commission, which proposed the integration of the Community’s energy market in 1985 (COM(85) 245 final) but remained unheard.

The policy stream was at this time still dominated by the policies almost all member states had pursued in order to secure the supply of energy. Above all, this meant that member states played a substantial part in their respective national economies. This had led to a predominantly state-owned monopolistic energy sector dominated by vertically integrated companies that were bound by long-term and partly anti-competitive contracts. Member states granted these companies exclusive rights in exchange for their fulfilling certain public service obligations. This was far from being compatible with the idea of liberalising natural gas markets. Although not popular, this idea was present in the policy stream as well. The USA, Canada and the United Kingdom (UK) are prominent examples of countries with third party access provisions (TPA), a cornerstone for any liberalisation policy.⁴ However, their experiences with TPA did not act as a catalyst for spreading the word about liberalisation but rather served as a reference for opponents of liberalisation (Stern 1992).

To sum up, as long as the security-of-supply frame prevailed, it was unlikely that a change in the problem or politics stream would open an agenda window suitable for pushing through a common energy policy. Furthermore, the policy stream lacked a worked-out alternative in this respect leaving potential policy entrepreneurs empty-handed.

As illustrated above, the state of the streams did not support an agenda change. So what changed that made it possible in general to push energy liberalisation onto the agenda? Basically, this was the introduction of the so-called free movement category as included in the Single European Act (SEA). This category refers to the free movement of goods, persons, services and capital by removing all physical, technical and fiscal barriers between member states by 1992.

Although energy was not included in the SEA, it provided the Commission with the opportunity to push for a European energy policy by using the widely accepted free movement category as a means of establishing a new problem perception: Instead of framing energy as an issue of supply security, it could be dealt with as a competition issue (Nylander 2001). In fact, nobody doubted that the energy markets were characterised by the barriers listed above (Palinkas 1989) and that this did not just hinder free trade in this sector but resulted in competitive disadvantages in other energy-intensive sectors. Coincidentally, by the time the SEA was passed, oil prices had begun to fall, which made concerns about the security of supply less urgent (Andersen 1993) and large energy consumers question the great price differentials between member states (Hancher 1990).

Encouraged by these price developments and the broad agreement on the SEA, the Commission started to push for a new problem definition and to draw attention to it. In May 1988, the Commission published its Working Document “The Internal Energy Market”, in which it finally investigated “the various existing or potential obstacles to a single energy market” and suggested some main subjects that should receive attention as a priority (COM(88) 238 final, Article 6). Regarding the natural gas market, the Commission proposed to prioritise the facilitation of the free movement of natural gas whilst referring to the introduction of the common carrier system (Annex to COM(88) 238 final), which would lead to the establishment of common rules for this market sector.⁵ Hence, the Commission’s Working Document did not just apply the free movement category to the energy sector for the first time but also suggested a further course of action. As a result, the agenda window opened.

Although the problem stream was ripe regarding the liberalisation of energy, the politics and policy streams were not. Hence, policy entrepreneurs faced two major challenges: to promote political support for the blocked IEM and to initiate the development of alternatives because by the late 1980s no European natural gas policy community was engaged in working them out (Matláry 1997). Given the Commission’s past attempts to establish a common energy policy, it was not surprising that it was the pivotal policy entrepreneur during the agenda window. The European Council only asked once the Council to push the IEM forward at its Rhodes Meeting in December 1988 but remained silent about it thereafter.⁶

Before illustrating this low politics route a word on the Commission. Owing to institutional ambiguity, it would be misleading to assume that the Commission consistently acted as a coherent actor. Thus, it is essential to prove whether the IEM had been included in the Commission’s Working Programme as developed by the Commission President and whether the DGs involved were willing to implement it. Concerning the latter, the focus is on DG Energy and DG Competition being that both count as the most influential DGs regarding the IEM (see Andersen 1993).

With regard to the Commission President, Delors was re-elected in 1989. Hence, the same president, who had been in office when the SEA was passed and had supervised the application of the free movement category to the energy markets, was still in charge. Not surprisingly, he included the IEM in the Commission’s Working Programme throughout the entire agenda window in the respective Working Programme. With Cardoso e Cunha replacing Nicolas Mosar as Energy Commissioner in January 1989, this DG was strengthened. While Mosar had left “those ambitious to develop energy policy within the Community somewhat impotent”, Cardoso e Cunha was seen as an Energy Commissioner with “a desire for action” and the will to provide “a determined lead” (EC Energy Monthly, 01.01.1989) right from the start of his term of office. Peter Sutherland, Competition Commissioner under Delor´s first term of office, had taken a strong stance for making the IEM real if necessary through competition law (Power Europe 16.03.1989). His successor was Sir Leon Brittan “a liberalisation advocate” (Nylander 2001, p. 306), who had served under Margaret Thatcher in different cabinet positions and terms in office. Unsurprisingly, he followed Sutherland’s track and even opened infringement proceedings against electricity and gas import and export monopolies in all but two member states (Power Europe 28.03.1991).

While the Commission as such agreed on the goal, the completion of the IEM, there were different views on how to achieve it. The vast majority preferred political solutions to implementing the IEM through law, but Sir Leon Brittan favoured using competition rules and formulating directives unilaterally based on Article 90 of the EEC Treaty (Multinational Service 11/1991).⁷ Cardoso e Cunha supported this pro-competitive strategy, as can be seen in the fact that he substituted his director of the IEM task force with a director from the DG for Competition after less than a year favouring “a faster, more aggressive approach to the implementation of third party access” (EC Energy Monthly 01.04.1991). On the other hand, he was more cautious regarding the Article 90 approach, particularly in the light of the member states’ and his colleagues’ resistance (Multinational Service 10/1991). As a consequence, he championed political solutions but did not rule out the Article 90 approach right from the start. Nonetheless, Brittan and Cardoso were close allies and worked together in order to make the IEM a reality (EC Energy Monthly 15.01.1993). With a view to the scope of this chapter, the analysis treats the Commission as a whole where it acted cohesively and highlights the Competition and Energy Commissioner’s attempts to couple the streams.