EU proposes break-up of energy giants

The grip of Europe's energy giants on the Continent's oil and gas markets will come under threat today when the European Commission unveils plans which could mean formal separation of supply and generation companies.

A policy document will express a preference for full "unbundling" of ownership, but will also offer a less radical shake-up under which companies such as E.on and Electricité de France would retain ownership of network assets.

Although the European Commission president, Jose Manuel Barroso, backs full liberalisation he faces a battle to persuade France to support such a move.

The document will also fudge the issue of the extent to which the power firms should be held to account by regulators, presenting three options - one of which is the creation of a new EU-wide body.

The two other possibilities are reinforcing collaboration between national regulators or beefing up the European Regulators' Group for Energy and Gas (ERGEG). Under the second of these options, ERGEG would be formalised and given powers to adopt "binding decisions on regulators and relevant market players such as network operators, power exchanges or generators, on certain precisely defined technical issues and mechanisms relating to cross border issues".

Today's energy and climate change launch will unveil plans to push for new targets under which the EU's CO2 emissions would be cut by 30 per cent on 1990 levels by 2020 if other developed countries agree to follow suit, and 20 per cent if applied unilaterally.

The documents will also back the idea of fitting all new coal-fired plants with CO2 capture and storage by 2020, and progressively converting existing plants.

The document warns of the scale of the challenge facing Europe: "With 'business as usual' the EU's energy import dependence will jump from 50 per cent of total EU energy consumption today to 65 per cent by 2030. Reliance on imports of gas is expected to increase from 57 per cent to 84 per cent by 2030, of oil from 82 per cent to 93 per cent".