London, March 9:

The European Commission warned EU countries that radical changes in energy policy were essential if the 25-nation bloc was to meet the challenges of climate change, security of supply and rising prices.

It said the European Union needed to develop a common energy policy and an effective single market, increase diversity of supply, cut consumption, bolster pan-European networks for gas and electricity transmission, raise storage capacity to cope with crises and create a pan-European market regulator.

In a green paper outlining “the new energy realities facing Europe’’ the commission estimated the EU would need to spend EUR1,000bn over the next two decades to meet expected demand and replace ageing infrastructure. “The energy challenges of the 21st century requires a common EU response.

A common approach, articulated by a common voice, will enable Europe to lead the search for energy solutions,’’ commission president Jose Manuel Barroso said. The review comes two months after the EU received a sharp reminder of its vulnerability to energy shocks when a dispute between Russia and Ukraine disrupted supplies. The commission has also been under pressure from Britain over concerns about the availability and price of gas from continental Europe.

Europe’s energy sector has been riven by accusations of economic protectionism and the creation of national champions ahead of full liberalisation of the market next year.

Germany’s E.ON, which last year expressed an interest in Scottish Power, has bid EUR23bn for Spain’s Endesa, already the subject of a bid from domestic rival Gas Natural.