2014

Policy Change and the

Integration of European
Energy Markets
SCIENCES PO / EU : PUBLIC POLICIES LIKE ANY OTHER?
BRENDAN JORDAN ROWELL

Introduction:
The humble circumstances of the European Unions birth, as the European Coal and Steel
Community, have not prevented it from evolving into one of the most complex and innovative
polities in the history of governance. Indeed, successive rounds of enlargement, the construction
of the single market, and the development of a banking and monetary union have all served to
further this experiment in pooled economic and political sovereignty. Yet, despite its origins as a
marketplace for industrial inputs and fuel, the EU and its Member States have heretofore failed to
extend the principles or the structures of the single market to energy. Given that the European
Union has succeeded in developing and maintaining two other behemoth common economic
policies, the Common Agricultural Policy (CAP) and the Regional and Cohesion Policy, the lack
of a fully developed approach to energy, the lifeblood of European economies, is conspicuous
indeed. However, recent developments at the European energy level, coupled with the precarious
geopolitics of the EUs neighborhood might permit a shift away from the fragmented and
piecemeal approach that currently characterizes European energy markets.
While focusing specifically on the development of a common gas policy, this paper will
seek to understand why a comprehensive common European energy policy has yet to be developed,
and what the prospects for its eventual creation might be. Such understanding will necessitate a
thorough grounding in the political economy of gas and energy markets in Europe, in its Southern
and Eastern neighborhoods, and in the world at large. The geopolitical importance of energy
security, always salient, has become even more manifest over the past 15 years as European gas
customers have seen their supplies threatened in a succession of pipeline crises involving disputes
between Russian gas giant Gazprom and the mercurial transit state Ukraine. The ongoing political
crisis between these two states has thrown European gas dependence into sharp relief.
Research Question:
What are the historical and institutional obstacles to the formation of a common energy
policy with competence within the European Union? What are the prospects for the development
of such a comprehensive policy and concomitant competence?
Hypothesis:
A confluence of three different problem streams will create a window of opportunity in
which a number of policy entrepreneurs, above all the European Commission, will act to create a

common energy policy and to establish a common European energy market in which the EU will
have competence as a supranational regulatory apparatus. These factors include: the succession of
energy and political crises in Ukraine, the accession of several new Member States with high levels
of Russian gas dependence, and the projection of ever-increasing European dependence on
imported gas generally.
Background & Theoretical Framework:
The dynamics of energy politics are at once painfully obvious and byzantine in their
complexity. In order to understand their functioning on the European scale, this paper will draw
upon numerous theoretical approaches and apply them to the many different facets of the European
gas trade. The background explanations for how the European energy market came to exist in its
present form are best illustrated by a combination of the approaches of two different theorists of
European integration, that of Andrew Moravcsiks Liberal Intergovernmentalism (LIG) and Paul
Piersons theory of Path Dependency (PD).
Moravcisks LIG approach is often considered as one of the major or grand theories of
European integration. Couched in the traditions of international relations theories, LIG revolves
around the continued primacy of the traditional nation-state as a driver of European integration.
According to Moravcsik, the relationship between EU Member States and EU institutions is best
characterized as that of principal (Member State) and agent. Member States, as the principals,
agree to push forward integration and pool further sovereignty when and only when it suits their
national interests. After preferences are formed at the national level, a process of interstate
bargaining produces consensus on a superior outcome for the majority of Member States involved
in the bargaining process.
While the very grand-ness of this theory can prove problematic, in this case it provides a
useful lens through which to understand European gas market fragmentation. Whereas members
of the ECSC, EC, and eventual EU have historically found it preferable to pool sovereignty and
resources on the construction of a common and eventual single market and on complementary
policies like the aforementioned CAP and ERDF, this has not proven true for the energy sector.
The fact that national energy markets have remained incongruously immune to many of the single

market principles applied elsewhere seems to suggest that Member States have historically fought
to maintain their sharply divergent national preferences.1
What are the specific obstacles to the unification of the European energy market, and how
can we explain why EU Member States have for so long resisted any such attempts to achieve said
unification? While the EUs competence in competition policy has been used to force Member
States to divest from their national champions in many industries, energy resources have long
been perceived as being of strategic interest to a nations economy and security. Thus, while the
EUs competence in competition policy is expedient for Member States in ensuring locking-in
compliance by fellow members, such lock-in seems dangerous when applied to energy. Moreover,
certain EU Member States like the UK and Finland have decidedly more open attitudes towards
energy market liberalization than others, like France. This historical fragmentation of energy
market preferences has in turn blocked the development of any major EU involvement in
transnational energy infrastructure. Another aspect of European energy markets that reinforces this
fragmentation is the related preference for locked-in, long-term take as you pay contracts with
energy suppliers.
And theres where Paul Piersons Path Dependency Approach comes in. Path dependency
is another theoretical framework that is often presented as a grand theory of European
integration. Moreover, PDs emphasis on the importance of institutions in the European integration
process means that it is also often portrayed in opposition to the state-centrism of Moravcsiks
LIG. However, the resistance of European gas markets to unification presents an interesting
explanatory intersection that is complemented by both the LIG and PD perspectives. Pierson does
indeed take issue with Moravcsiks seeming willful ignorance of the gaps of control through which
European institutions gradually augment their control, but also suggests that LIG functions well at
any one given point in time while its capacity to explain the long term evolution of integration is
less successful.2 Pierson remedies this oversight by applying the principles of historical
institutionalism. Historical institutionalism posits that, despite the strong initial intergovernmental
character of the bargaining processes that begat the EC / EU, the legislative DNA of the European

Delors, Jacques et. al, Towards a European Energy Community: A Policy Proposal, Notre Europe (2010): 9-11
Pierson, Paul, The Path to European Integration: A Historical Institutionalist Analysis, Comparative Political
Studies 29 (1996): 123 163.
2

institutions architecture has ultimately and indelibly transformed the Member States bargaining
positions henceforth.
This indicates that the unifying mechanisms of the EUthe common policies and the
treaties that bind the Member States to them necessarily lock them into processes that will evolve
beyond their control. While this does conflict with LIGs emphasis on the inherently
intergovernmental nature of the EU, thus far it does nothing to refute how aptly the LIG framework
interprets Member States protection of their individual energy prerogatives. However, one of the
central tenets of Path Dependence is the idea that history matters. At various points Member
States have committed themselves to greater and more varied forms of economic and political
integration, thereby ensuring ever more integration (at least, according to Neofunctionalist
accounts of spillover). Nevertheless, by systematically omitting energy markets from this process
(whether explicitly or through weak legislation), the Member States have ensured that their
eventual integration will be all the more difficult, if not entirely unlikely. The national policies of
Member States, whether in favor market liberalization or the defense of state-sponsored utilities,
have reinforced the prevalence of bilateral energy relations with third-country suppliers and
decreased the otherwise clear market logic of a shared energy infrastructure. Half a century of such
an incoherent path constitutes a number of very real obstacles.
However, as aforementioned, certain events and evolving tendencies over the past two
decades have indicated the possibility in a shift away from a primarily intergovernmental
organization of European energy markets. While Moravcsiks LIG and Piersons PD theories
provide us with complementary frameworks for understanding how the state of EU energy markets
came to be, analysis of the prospects for energy market integration will rely on frameworks more
focused on policy formation than international relations theories. Specifically, this papers
assertions concerning the hypothetical development of a common energy policy will rely upon
John Kingdons path breaking Multiple Streams Framework (MSF). The MSF provides us with a
nuanced, yet comprehensive approach to understanding the various processes in the policy
formation process. The MSF suggests that this process involves three distinct streams or currents:
a problem stream, a political stream, and a policy stream. The confluence of these streams which,
when engineered is referred to as coupling, creates a window of opportunity through which a
policy entrepreneur can act to transform extant policies or introduce an entirely new policy sets.

While the MSF framework does rely on policy entrepreneurs to actively couple the streams,
changes within each stream are often endogenous, and do not necessarily occur in sequence with
one another. Thus, policy solutions can and probably do already exist, floating around in the ether
of ideas. However, the context of the policy change will always vary. In Paul Copeland and Scott
James analysis of the European Commissions policy entrepreneurship3, he suggests the two most
likely situations in which a policy window will open:
a) a problem stream in which problems require solutions or
b) a politics stream in which solutions chase problems.
Thus, while a catastrophe or the increasingly routine occurrence of a problem might make
it impossible for the public and politicians to ignore, the cyclical electoral nature of democracies
might also lead to politicians actively seeking problems around which to develop their platforms.
Although specifically referring to the economic reform process in the EU, Copeland points out
that its overlapping institutional architecture provides greater scope for policy entrepreneurs
within the Commission to couple streams and to reconfigure the reform agenda.4 In keeping with
Piersons description of European institutions seeking to maximize supranational power through
gaps in control5, this helps to describe the circumstances in which the Commission might use its
agenda-setting prerogatives to drive policy change in energy policy. The Commissions ability to
reformulate perceived policy failures to address new or recurring policy problems, also suggested
by Copeland, certainly plays a role in the realm of energy politics. For example, policy solutions,
in the form of EU-level internal energy market legislation, have been on the table for decades.6
The question remains: what changes, in what streams, might permit the Commission or
other policy entrepreneurs to couple streams and introduce substantive energy integration? This
paper contains an implicit sub-hypothesis that the major EU Member States, with their fully
developed and post-industrial economic bases, are loath to abandon their respective energy status
quos for the inconvenience this would pose; hence the blocking of Mandatory Ownership
3

Copeland, Paul and James, Scott, Policy Windows, ambiguity and Commission entrepreneurship: Explaining the
relaunch of the European Unions economic reform agenda, Journal of European Public Policy (2013): 1 21.
4
ibid.
5
Pierson, Paul, The Path to European Integration: A Historical Institutionalist Analysis, Comparative Political
Studies 29 (1996): 123 163.
6
Eikeland, Per Ove, The Third Internal Energy Market Package: New Power Relations among Member States, EU
Institutions and Non-state Actors?,Journal of Common Market Studies 49 (2011 : 243 -263.

Unbundling (MOU)7 in the 2007 internal energy market package. However, newer EU Member
States, including the Baltic, Central, Eastern, and Southern European states are in large part
heavily, if not entirely, reliant on gas of Russian origin. This introduction of even greater disparities
in energy security and (inter)dependence could feasibly shift the balance of EU Member State
preferences away from a voting majority that favors closely guarded national markets to one that
prefers the solidarity and potential efficiency of pooled energy sovereignty and infrastructure. The
Ukrainian pipeline crises of the last decade, coupled with the present political crisis in the Ukraine,
presents additional currents within the problem and political streams. Thus, an activist
Commission could create a substantial window of opportunity by joining the currents of the
political stream (new Member States, political crises) to those of a numerically quantifiable
problem stream (present and projected energy dependence) with the sort of solutions that have
long existed in the policy stream (mandatory ownership unbundling, common infrastructure, to
name a few).

Research Design + Methodology:

Energy politics in general have seen no shortage of substantive political analysis, and the
prospect of a common European energy policy is no exception. As such, the paper will draw upon
secondary sources in the form of the extensive literature surrounding the topic. If fully developed,
the paper would certainly include a full review of the extant literature concerning the political
economy of energy within the EU and its immediate neighborhood. However, a literature review
would represent only the initial methodological approach to the subject. Ideally, such secondary
analyses would be combined with analysis of extant primary sources, as well as the acquisition of
new primary sources. This would provide sufficient qualitative information to inform the research
project, but would not represent the full scope of the proposed research methodologies. A
comprehensive methodology would also involve the gathering of quantitative data and, methods
permitting, the joining of both qualitative and quantitative data. The whole of these proposed
methods will be discussed below.
With proper resources, the review of these analyses would be substantially complemented
by this papers own analysis of a variety of primary sources, in the form of EU green papers and
7

ibid.

white papers, as well as press releases and other national literature detailing the official positions
of individual Member States, and finally the major gas companies and / or peak organizations
representing them in each MS. Of similar interest would be the voting patterns of Member States
within European Council negotiations, as well as the voting records of the Members of European
Parliament of each Member State.
When and wherever it seems that the above research seems inadequate, it would be
preferable to arrange for structured interviews with the most important individual actors implicated
in energy markets at the national and supranational level. Thus, interviews with high-level
bureaucrats and heads of national energy ministries or agencies, along with their corollaries at the
EU level (both in the Council of Energy Ministers and the DG Energy + Climate) and the heads
of national gas companies would be conducted and added to the general body of literature.
The paper will seek to build a data base in order to provide a quantitatively descriptive
landscape of the aforementioned voting patterns. By using the methods (and software) of content
analysis, the paper will seek to develop additional datasets that numerically quantify the specific
discourses of the abovementioned actors. What combinations of words are used most often and by
whom? The use of these methods will hopefully allow the paper to tease out national preferences
through the quantification of language usagefollowing the previous qualitative analysis of said
usage. Finally, the proposed data base would also include numerical information on the historical,
present, and projected energy dependence of each Member State.
The acquisition and aggregation of such information, diverse in its breadth and depth,
would be valuable for the body of extant literature. However, with time, training, and resources
this research project would apply statistical methods to this political analysis. The application of
various types of linear regression, including multiple regressions and linear hierarchical modeling8
would be applied in order to predict future patterns of voting behavior of the various actors (at the
national and supranational level) based on the quantification of their past voting behavior, their
level of energy (inter)dependence, and the frequency of key words or phrases identified in the
content analysis of their discourses.

Pollock, Philip H. The Essentials of Political Analysis. Washington, DC: CQ Press, 2011.

Conclusion:
In many ways, the present research proposal remains inchoate. The author could benefit
from a more thorough grounding in the recent past of European energy politics and certainly by
reviewing the existing literature. However, with sufficient time and resources it presents an
opportunity to contribute a comprehensive qualitative and quantitative approach to understanding
the present state of energy markets, and more importantly, the prospects for policy change in this
vital realm of political economy as it teeters between the intergovernmental and the supranational.
The recent succession of enlargements to the European Union, coupled with past and ongoing
political crises in the Ukraine underline the precarity of the European Unions energy market
fragmentation. Now more than ever, national European leaders like the Polish Prime Minister
Donald Tusk9 have common cause with supranational leaders like Energy Commissioner Gnther
Oettinger10 in proposing the creation of a unified and truly common European energy policy.
Regardless of the outcome, the subject is and will remain a fascinating topic for students of
international relations, European politics, and policy formation alike.

Tusk, Donald. A united Europe can end Russias energy stranglehold. The Financial Times, April 21st 2014.
Oettinger, Gnther, A European energy strategy is required to secure the EUs future energy needs, LSE
European Politics and Policy Blog, October 17, 2013.
10

Works Cited:

Copeland, Paul and James, Scott, Policy Windows, ambiguity and Commission
entrepreneurship: Explaining the relaunch of the European Unions economic reform agenda,
Journal of European Public Policy (2013): 1 21.
Delors, Jacques et. al, Towards a European Energy Community: A Policy Proposal, Notre
Europe (2010): 9-11
Eikeland, Per Ove, The Third Internal Energy Market Package: New Power Relations among
Member States, EU Institutions and Non-state Actors?,Journal of Common Market Studies 49
(2011 : 243 -263.
Oettinger, Gnther, A European energy strategy is required to secure the EUs future energy
needs. LSE European Politics and Policy Blog. October 17, 2013.
http://blogs.lse.ac.uk/europpblog/2013/10/17/a-european-energy-strategy-is-required-to-securethe-eus-future-energy-needs/
Pierson, Paul, The Path to European Integration: A Historical Institutionalist Analysis,
Comparative Political Studies 29 (1996): 123 163.
Pollock, Philip H. The Essentials of Political Analysis. Washington, DC: CQ Press, 2011.
Tusk, Donald. A united Europe can end Russias energy stranglehold. The Financial Times,
April 21st 2014. http://www.ft.com/intl/cms/s/0/91508464-c661-11e3-ba0e00144feabdc0.html#axzz30MqyCfHS