Against All Odds: The Liberalisation of the European Natural Gas Market—A Multiple Streams Perspective
Modified multiple stream framework. Note: The different shapes of the arrows indicate the varying importance of the three streams in the decision window
The first coupling process refers to the setting of the institutional agenda and is identical to Kingdon’s framework. The corresponding policy window is labelled “agenda window”. The output of this coupling process is a worked-out proposal that increases the number of alternatives available in the policy stream and opens the “decision window”. This second coupling process focuses on policy formulation and legitimation, and it captures the political struggle about the concrete design of the proposal. Which of the ideas comprising the policy stream are seen as suitable for gaining the majority needed for a decision depends on the activities of policy entrepreneurs. The problem stream decreases in importance as soon as the issue has entered the institutional agenda. It will be dealt with irrespectively of the pressure to address it. This does not mean that the problem stream is irrelevant for the decision window because it influences the bargaining dynamics—but not whether bargaining takes place at all. The passing of an act marks the end of this coupling process provided that it was a successful one (see also Herweg 2013).3
5.3 Analysis of the General Agenda-Shaping Process
The subsequent analysis starts with a summary of the state of the streams in the early 1980s. This serves as a reference point for illustrating why only a few policy entrepreneurs had been pushing for the liberalisation of the energy markets and why their coupling activities had no chance of success. The remaining analysis focuses on how the agenda window opened and how policy entrepreneurs’ coupling activities led to the introduction of the gas draft in 1992 and finally to its passage in 1998. Empirically, the analysis is based on primary materials, in particular: legislative documents, secondary sources and above all media reports.
5.3.1 State of the Streams in the Early 1980s
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.
5.3.2 The Single European Act: Setting the Stage for the Agenda Window
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.
188.8.131.52 The Promotion of Political Support
In order for an act to rise on the institutional agenda, political support is needed. This was a challenging task as member states and the gas industry reacted with fierce opposition to the Working Document (Stern 1998), particularly to the common carrier system. The Commission met this challenge in three steps.
Firstly, for the first time regarding energy policy (EC Energy Monthly 14.02.1992), the Commission brought everyone involved in gas matters together, which gave them the opportunity to voice their position by setting up two Consultative Committees to discuss third party access (TPA) in-depth (COM(89) 334). These committees were established in mid-1990 and chaired by members of the DG for Energy, Competition and the Single Market and Industry. One committee was composed of representatives from member states and the other one consisted of representatives from the gas industry and consumers (International Gas Report 13.06.1991, COM(91) 548 final).
To summarise, both committees failed to hold constructive talks (Stern 1992), and they did not lead to a climate of political support for the Commission’s initiative. Nonetheless, it helped the Commission to improve its understanding of the sector, to obtain an overview of possible arguments in favour of and against liberalisation (Lyons 1994), as well as all the technical information needed for drafting a proposal (Power Europe, 01.08.1991). Most importantly, the Commission came to understand that a common carrier system was unrealistic, while TPA for large energy consumers was potentially obtainable (EC Energy Monthly, 01.04.1991). Furthermore, the committees contributed to the initiation of a European policy community, as shown by the establishment of Eurogas—the European association of the natural gas industry representing major transmission and distribution companies, or the International Federation of Industrial Energy Consumers (IFIEC), both of which participated in the talks (EC Energy Monthly, 01.07.1991).
Secondly, the Commission followed a dual-track strategy. This consisted of drafting a directive that would introduce common rules for the natural gas market on the one hand and launching infringement proceedings against competition infringements in the gas sector on the other (Platt’s Oilgram News 08.04.1991). The Commission thereby underlined its determination to achieve an internal natural gas market.
Thirdly, spearheaded by Leon Brittan, the Commission attempted to change the fallback positions of those involved by threatening to decide on the issue itself. This threat was credible because it was backed by the European Court of Justice (ECJ), which had sanctioned the Commission’s use of its powers under Article 90 in the context of liberalising the telecommunications equipment market. Before this ruling, the Commission had announced its intention to use its powers, as specified in Article 90 in the field of energy, should the ECJ confirm its course of action (Journal of Commerce 22.03.1991).
Consequently, in July 1991, two interconnected proposals regarding common rules for the natural gas market were circulated privately to interested parties. In a joint move by the Competition and Energy Commissioner, the Commission circulated one proposal which was signed by Leon Brittan and based on Article 90 and one which was based on Article 100a and signed by the Energy directorate (Stern 1992). The Commission thereby demonstrated its willingness to decide on the liberalisation issue itself if necessary—very much to the discontent of member states, the EP and industries affected by the proposals.
From the point of view of these players, this reduced the fallback positions available to them as they would lose any opportunity to influence the directive´s content. As blocking the proposal became more and more unrealistic, Eurogas changed its strategy and attempted to form an alliance with the EP instead of exclusively lobbying the Commission (International Gas Report, 03.10.1991). Up until then, lobbying had generally taken place in member states and only at this point did it start to be directed at the European level (Nylander 2001).
Against the backdrop of the strong resistance of those involved, Cardoso e Cunha changed his position and excluded the Article 90 approach as a viable option for the Commission. By pushing for a political solution in the form of a Council directive, he left Brittan behind because he still favoured a unilateral decision on the issue (Multinational Service 11/1991). As a consequence, the Commission as a whole decided to drop its Article 90 approach for the time being, but at the same time it did not explicitly exclude a later return to it by stating that the Commission still “reserves the right to make use of all its powers conferred on it by the Treaty as and when appropriate” (COM(91) 548: 9). The knowledge that the Commission could play this card made those involved willing to negotiate a political solution. In this sense, the politics stream had become ripe.