Brussels set to unveil €1 trillion energy plan

A continent-wide electricity and gas grid, more open energy markets, a new regulator and €1 trillion (£684bn) investment over the next two decades emerge today as key ambitions of the European Commission's energy policy.

A green paper on energy will highlight the importance of diversifying the EU's energy supply and of forging a "common approach" towards dealing with Russia, the bloc's most important energy supplier.

Today's document, launched by the European Commission president Jose Manuel Barroso, comes amid rising concern over utility mergers in France and Spain designed to ward off takeovers from other European companies

The paper highlights weaknesses in the single market, saying differences among EU countries over their approach to competition are "preventing the development of a truly competitive European market".

The extent to which transmission and distribution are unbundled varies from state to state, meaning markets are "open to fair and free competition to differing degrees", it says, adding that if implementing current directives proves ineffective, further measures "should be considered".

Efforts to forge an effective single market with a European electricity and gas grid may require a new energy regulator, the document argues. It also suggests the creation of a European Energy Supply Observatory to monitor the needs of the 25-nation bloc and analyse trends.

In addition to a better-functioning energy market, the Commission highlights the need for more investment to improve infrastructure, build new interconnectors and develop new sources of energy.

It does not pretend that providing energy security will come cheaply. The document argues that "in Europe alone, to meet expected energy demands and to replace ageing infrastructures, investments of about €1 trillion will be needed over the next 20 years".

Neutral on the benefits of nuclear power, the document calls for greater energy efficiency and puts new emphasis on renewable sources. It also raises the possibility of a target for low-carbon energy.

The paper, to be discussed at a meeting of EU heads of government this month, reflects the growing political and economic importance of energy.

Last year Tony Blair surprised many when he backed the idea of a common EU energy policy before a summit of European leaders at Hampton Court.

About half of the EU's energy needs are met by imports at present, a figure that will increase to 70 per cent in the next 20 to 50 years on current trends.