• We, the ministers of the leading industrially developed democracies and representatives of the EU, met in Moscow on 31 March - 1 April 1998 to discuss the important issues our countries are facing in terms of energy.
• Ensuring reliable, economic, safe, and environmentally sound energy supplies is one of the underpinnings of sustainable development for our countries and for humanity. Under conditions of increasing global interdependence and liberalisation in the energy sector, we reaffirm our commitment to international co-operation and exchange of information and experience on global energy issues in working towards these objectives.
• We note that the world market is characterised by expanding demand for reliable supplies and increasing reliance on market forces to meet this demand. In this light, we welcome trends towards liberalisation and increased competition among energy suppliers as part of the continuing integration of global energy markets. At the same time, we recognise that governments continue to have a role, compatible with the development of competitive energy markets, to ensure security of supply as well as environmental objectives.
• We recognise that open and competitive energy markets offer the best way to provide secure, reliable and affordable energy to consumers, and that transparent, non-discriminatory, market-based legal and regulatory frameworks, including those governing the transit and transport of energy products, are essential to attract the significant new investment which is required to meet the future energy needs of our countries.
• We reaffirm the importance of promoting sustainable development and the efficient production, conversion, transport and use of energy resources. This is one of the biggest challenges and opportunities for all countries. Research, development and market dissemination of cleaner, more efficient, less carbon-intensive energy technologies will be essential in meeting sustainable development objectives.
• We welcome the contribution of the Business Consultative Meeting in Moscow on 31 March, on challenges and opportunities facing the global energy sector. We welcome reform efforts which economies in transition are undertaking in the energy sector. Foreign and domestic private investment contribute to integration of energy markets. In this context, the Business Consultative Meeting noted Russia's important role in the global market and energy security.
• We welcome the Nuclear Safety Working Group Report: Ensuring Nuclear Safety In An Increasingly Competitive Electricity Sector and in the light of the importance of nuclear safety reaffirm our commitments made at the 1996 Moscow Summit on nuclear safety and security.
• We welcome the contributions of the International Energy Agency and the Energy Charter Secretariat regarding market outlook, investment and transit, and note the recommendations in their papers.

Market Outlook

• We recognise the importance of good forecasting methods in the formulation and implementation of energy policies. We note that IEA projections indicate that without new policies to improve energy efficiency and reduce emissions, world energy demand and carbon dioxide emissions could increase by about two thirds between 1995 and 2020, with the bulk of additional demand being met by fossil fuels. These prospects are based on assumptions of continued world economic growth, successful market restructuring in countries in transition, and maintenance of economic growth in developing areas, including Asian countries where most of the new demand will arise irrespective of current economic difficulties.
• With respect to energy supply we recognise the importance of diversification of domestic and regional energy systems to allow for consideration of all sources including oil, gas, coal, nuclear, hydro and renewable primary sources; and of greater energy efficiency.
• Many of the countries of the Eight are dependent on imports of oil. In order to avoid supply shortages and oil price shocks in the future, we note the importance of flexible markets and pricing, and enhanced information flow among all market players. Government cooperation in dealing with the negative impact of such disruptions, including schemes such as the IEA co-ordinated response measures and emergency sharing programme, is also important.

Energy Sector Structure

• We recognise that open and competitive energy markets are crucial for attracting private sector investment, promoting sustainable development of the energy sector, and improving consumer choice. Such markets require stable, transparent, non-discriminatory legal, fiscal and regulatory structures creating a favourable investment climate. In this context, we support economic reform efforts with regard to conditions of investment, trade and transit. Ratification and implementation by signatories of the Energy Charter Treaty and production sharing agreement legislation are important examples.
• We recognise that liberalisation can be promoted through a legal regime that supports private ownership of assets, provides for enforceable contracts and dispute resolution mechanisms and, where state ownership remains, allows government-owned utilities to enter into enforceable power purchase agreements with private developers.
• We recognise that in order to promote more competition in gas and electricity markets, governments and regulators may choose to separate production, transmission, distribution and supply functions, to let companies compete in offering services to energy consumers, and to allow competing producers and suppliers access to transmission and distribution facilities on a non-discriminatory basis. Buyers and sellers of gas and electricity services should be free to negotiate the price, terms and conditions of those services without government approval. In markets in transition to full competition, governments may find it necessary to take action to protect energy consumers.
• We also recognise that in restructuring the natural gas and electricity sectors, governments may take into consideration public policy goals such as universal electricity service, continuity of supply, long-term security of supply, safety and environmental protection. Such public policy goals should be pursued through measures that are compatible with development of competitive energy markets.
• We consider that liberalisation and restructuring should be supported by legislative and regulatory frameworks that define clearly the relationship between the government, energy suppliers and, where appropriate, regulatory agencies. Regulations should establish equitable treatment of government and private sector entities participating in the sector and fair and open-access to markets by both domestic and foreign entities. Regulatory agencies should be independent of political interference and have sufficient resources to operate effectively.

Energy Investment

• As well as looking for an open market structure, we are fully aware that potential investors will base their decisions on a thorough assessment of political, legal and financial risks. In particular, we recognise that companies' investment decisions will be greatly influenced by the following considerations:

• political and economic stability in the country or region concerned;
• the existence of a secure legal framework for energy investments, including enforceability of contracts and access to effective dispute settlement procedures;
• clear, equitable and stable taxation rules which take full account of the need to encourage long-term investments;
• an absence of discrimination between companies, whether on nationality or other grounds;
• access to energy transport systems, and liberalised trade in energy, energy equipment and services in accordance with WTO rules.

Nuclear Safety

1. Safety is a prerequisite for the operation of nuclear power plants. We recognise that primary responsibility for nuclear safety rests with the operators of nuclear installations and that responsibility for ensuring the effective regulation of nuclear safety rests with national governments. We reaffirm our commitment to the highest internationally recognised safety levels which must be the primary consideration for the exploitation of nuclear energy. In this regard, we attach greatest importance to the full implementation of the Nuclear Safety Account agreements. While recognising that competitive pressures in the electric power sector are substantial and growing, we commit ourselves to keeping safety as our absolute priority in the use of nuclear energy.
2. We recognise that a proper commercial framework in which nuclear generators receive the revenue from the power which they supply is necessary to generate the financial resources needed to keep nuclear installations safe and enable plant operators to cover their finance and operating costs and make new investments to provide for protection of public health and safety. Thus, appropriate regulation, good management, and financial viability, including cash collection are important elements of a safe nuclear industry.
3. We recognise that in order to establish conditions ensuring the safe development of nuclear power, expansion and deepening of international co-operation in the nuclear field is necessary.

Transit and Transportation

4. We recognise that the interdependence of producer, consumer and transit countries requires multilateral co-operation in the development of economically viable international energy transmission networks. We note that many European countries are heavily reliant on oil and gas imports across networks from neighbouring regions and that the economies of energy producers benefit substantially from these exports. Therefore, secure, efficient and sufficient pipelines with diversified routings are of great importance to all parties.
5. We recognise that links and capacity problems between producing and consuming regions can best be alleviated through a market-driven approach to infrastructures development and resulting private investment. As with other forms of energy investment, governments must play a role in creating the appropriate framework conditions which favour the mobilisation of private investment capital. In this light, transit provisions such as those of the Energy Charter Treaty provide an effective framework on which to develop such conditions.
6. We reaffirm that construction and operation of oil and gas pipelines, as well as electric transmission lines, should take appropriate account of safety and environmental requirements. International co-ordination on safety and environmental standards and the technical specifications for meeting them is essential to ensure the security of supply. But consistent with public policy objectives including environmental safeguards, construction of new lines or the use of existing lines should be open to all commercial participants and contribute to security of supply.
7. We note that, unlike oil and gas markets, electricity, being a secondary energy source, has historically developed in regional markets. Power grids have complex and capital intensive technical requirements for their operation and interconnection. Establishment of economically viable connections between now separate grids should be pursued.
8. We agree that access to pipelines and transmission lines should be available on a non-discriminatory basis. This will optimise access to markets, assist the diversification of imported energy, support private investment and promote effective use of oil and natural gas reserves. Non discriminatory access to secured pipelines greatly contributes to development of energy resources, especially in landlocked countries or areas such as Central Asia, the Caucasus, and Siberia, and their integration to the world market.

Energy and Environment

9. We recognise that all stages of the energy cycle production, transport, conversion and end use can have significant environmental impacts on a local, regional, and global scale. We welcome the agreed legally binding targets at the Third Conference of the Parties to the UN Framework Convention on Climate Change in Kyoto in December 1997 which will result in an overall reduction of greenhouse gas emissions in industrialised countries to 5.2 per cent below 1990 levels, this target represents a reduction in emissions of the order of 20 to 30 % below the levels that would be expected without mitigating action.
10. We reaffirm the commitments on emission reduction made by our countries in the Kyoto Protocol. Policies and measures to achieve these reductions are expected to include those aiming at improving energy efficiency, including responsible use of less carbon-intensive energy such as natural gas, renewables and nuclear. Mechanisms such as international emissions trading, joint implementation and project activities under the clean development mechanism are expected to be important elements in the fulfillment of the Kyoto commitments. We also affirm the importance of making progress on the development of rules on these flexible mechanisms at COP4.
11. We recognise the important role developing countries will need to play in future climate change response, particularly given their urgent need for further economic development. While acknowledging the efforts they are making already, we urge our developing country partners to take on further action to limit their emissions. There are many opportunities to reduce emissions and at the same time achieve economic benefits, for example through improved energy efficiency. We also note the important role that transfer of technologies practices and processes, particularly through the private sector, will play in the mitigation efforts of developing countries.
12. We recognise that in order to meet the Kyoto targets in a cost-effective fashion, it will be essential to accelerate the market adoption of more efficient technologies for energy production, transportation and use which are currently available in particular those which improve energy efficiency or develop renewable energy sources. Substantial efficiency gaps remain between the best available technologies and those currently in use, and we note the potential that exists in many countries to improve efficiency through new investments with net economic benefits.
13. We recognise the need to maintain strong long-run research and development efforts to further improve the efficiency of technologies for energy production, transportation, and use, as well as to lower their costs and note the role of governments in working with industry to support the development of climate friendly technologies. Growing competition in energy markets makes it more important for industry to sustain adequate long-run R&D efforts, to which governments should also be vigilant.
14. We recognise that governments play an important leadership role in promoting the adoption of more efficient, less carbon-intensive energy technologies in close cooperation with the private sector.
15. With the continued development of new technologies, renewable energy sources such as solar, small hydro and wind power are becoming increasingly economic. For environmental and security reasons, we welcome encouragement by governments to increase the share of such renewable energy sources in primary energy.

Conclusions

16. We call upon the co-chairs to forward this report to the leaders gathered for the Birmingham Summit. We are pleased to note the consensus achieved today on such important issues as energy market reforms, nuclear safety, and the strong links between how we produce and use energy and the quality of the environment we share. We agree to continue to pursue these vital issues through bilateral channels and the relevant multilateral fora.

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Source: Canada, Office of the Ministry of Natural Resources.