Whilst concerns about energy security lay at the heart of the European integration project, European energy policy was initially restricted to the coal and nuclear sectors, with the EU deriving its authority in these areas from the treaty establishing, in 1951, the European Coal and Steel Community (“ECSC”) and, in 1957, the treaty establishing the European Atomic Energy Community (“EURATOM”). The ECSC Treaty expired in 2002, with the provisions concerning state aid to coal companies being transferred into the EC Treaty.

In the non-nuclear segments of energy policy, article 3 of the EC Treaty as amended by the Treaty of the European Union (“TEU”) in 1992, which provides that “the activities of the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein: … (u) measures in the spheres of energy …”, bestows to date competence in energy matters upon the European Union. Article 174 TEU sets out the objectives of the European Union and imposes an obligation on the EU to pursue a “prudent and rational utilisation of natural resources”. Whilst not devolving any specific competences to the EU, this article has been the basis for the EU’s recent initiatives on security of supply and various initiatives on energy efficiency.

As a consequence, the EU’s energy policy is shaped by a number of policies emerging from several other areas within its competency such as those relating to the internal market, the environment, competition, and, to a lesser extent, consumer protection: The First and Second Gas and Electricity Directives, for example, which have wide ranging consequences for the European energy sector (see below) have been enacted in order to develop and complete the internal market for gas and electricity. Competition policy, enacted under the chapter of the TEU which contains the “common rules on competition, taxation and approximation of laws” (usually referred to as Title VI (Articles 81 to 97) TEU), continues to have a major impact on European energy policy, for example through Commission decisions on proposed mergers by energy companies; and competition implications of the unbundling and third party access provisions of the Second Gas and Electricity Directives, respectively.

Competence for other major EU initiatives, such as the European Union Emission Trading Scheme (“EU ETS”), has been derived from the environmental chapter of the TEU (usually referred to as Title XIX of the TEU).