The EC is considering cutting funding to neighboring EU countries which do not harmonize their energy markets in line with Energy Community rules, an EC official said Monday.
“We could link progress and EU funding or freeze money for countries not applying commitments in a carrot-and-stick approach,” Blanca Andres-Ordax, EC coordinator for the energy community, told an industry workshop in Brussels.
The Energy Community is based on a treaty between the members and the EU which came into force in 2006. The aim is to foster cooperation in the region and integrate it into the wider EU energy market.
“In five years the EC has given a solid, institutional framework for cooperation, mutual support and exchange of expertise,” she said.
But she added that the EU’s goal of synchronizing neighboring countries’ energy markets faces challenges.
“The main challenges are filling the gap between theory, such as the political commitments, and practice,” she said.
The EC acknowledges that encouraging the private investment required to transform smaller countries and help to achieve energy market parity is difficult.
Weak regulators, a failure to implement rules and barriers to competition are creating an uncertain market and making investors less keen to commit, Andres-Ordax said.
“There has been a lot of public money but these countries are still not attractive to private investors,” she said.
Ukraine, which officially joined the Energy Community in February this year, is enacting the necessary procedures, the EC said.
But the first real test for the country will be at the next ministerial council meeting, where its progress will be reviewed, Andres-Ordax said.
The ministerial council is the decision-making body of the Energy Community and is made up of representatives from the EU and participating countries.
One aim of the Energy Community is to attract investment in power generation and networks to ensure stable and continuous energy supply to the EU. It also aims to boost cross-border energy trade and establish European trading rules.
The Energy Community members are Albania, Bosnia and Herzegovina, Croatia, Kosovo, the former Yugoslav Republic of Macedonia, the Republic of Moldova, Montenegro, Serbia and — since February — Ukraine.