European Union heads of governments met recently to discuss immediate actions to replenish depleted natural gas storage and urgent measures to help retail consumers shoulder some of the burdens of rising energy costs.
European Union heads of government met recently to discuss immediate actions to replenish depleted natural gas storage and urgent measures to help retail consumers shoulder some of the burdens of rising energy costs.
Energy is now Europe’s top political agenda after fossil fuel costs hit records amid a gas supply crunch and concerns over shipments from Russia, the biggest source of EU imports. While the European Commission has outlined steps to reduce the dependence on Moscow by nearly two-thirds already this year, governments are coming under mounting pressure from consumers and companies to cushion the impact of the crisis.
However, a split within the European Union members is deepening over how to deal with the price spikes. Countries predominantly in the south of the bloc are calling for urgent action to decouple power costs from gas prices, while northern members are urging restraint.
Italian Prime Minister Mario Draghi, Spain’s Pedro Sanchez, Portugal’s Antonio Costa and Greece’s Kyriakos Mitsotakis on Friday discussed a plan to make Europe more resilient to energy shocks, including a cap on the price of gas imports.
At the same time, nations including the Netherlands, Denmark, Germany, Estonia and Finland have warned against intervening in the wholesale market and oppose a price limit. The EU needs unanimity to take these kinds of political decisions, but member states have such varying sources of energy that it’s difficult to fashion a joint emergency response.
The commission is currently designing its second set of emergency measures that member states will be able to choose from. They will focus on income support to vulnerable consumers, such as vouchers or partial bill payments, and state aid for affected businesses. The toolbox will be adopted this week and presented to the leaders at their March 24-25 meeting.
In yet another option of reducing end prices, a reference price could be set for the wholesale market. Under such a scenario, power generators would be subsidized for the difference between their actual costs of gas, oil, or coal and a pre-set reference price. Alternatively, a cap could be introduced on the wholesale electricity market.
Yet in the assessment of the commission, in addition to being costly, such steps could distort competition and complicate cross-border trade.
Read more about the European electricity prices crisis here
Read more about the REPowerEU plan: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1511