Bundestag approves energy price brake – and the EU continues to debate – politics

In Berlin, the Bundestag passed the planned electricity and gas price brake on Thursday, which will relieve citizens and companies of energy costs from January. The controversial EU gas price cap, on the other hand, is not to be passed until Monday at a meeting of the 27 energy ministers. This task was given to them by their superiors, the heads of state and government, at the EU summit in Brussels on Thursday. The ministers still have to clarify the last open point: the exact amount of the price limit. All other points of contention were cleared up at the summit.

Chancellor Olaf Scholz (SPD) already had to when he arrived top meeting said, he was “sure that we could tie down a few more small, remaining conditions” for the cover today – especially on the sidelines. This would pave the way to an “amicable and joint solution”. The member states have bitterly argued about how tough this state prescribed upper limit should be. The federal government belongs to the small camp of cap skeptics who warn against a limit that is too low. After all, artificially low prices could fuel demand, even though Europe urgently needs to save on gas. At the same time, producing countries could prefer to send their tankers with liquefied natural gas – which is abbreviated to LNG in English – to other continents, where more is paid.

Nevertheless, the majority of governments, including Italy’s, are calling for a hard, comparatively low cap in order to curb the expected rise in gas prices in the coming year. In its draft law, the Commission proposed a cap of 275 euros per megawatt hour of gas. EUR 350 was reached in August, partly because EU governments outbid each other to buy gas for their storage facilities. But for two months the price has been below 150 euros again. The summit now apparently agreed that the ministers should agree on a value between 180 and 220 euros on Monday.

The regulation does not apply to consumers, but to gas suppliers and traders. You may not purchase gas at a price beyond the cap. In order to address the concerns of skeptics like Germany, the regulations were strengthened, leading to an automatic end for the cap: If it causes problems, for example because tankers with liquefied natural gas turn off, it is lifted again.

Solar roofs should be approved faster

Another point of contention was whether the cap should only apply to transactions on gas exchanges or also to sales outside of these trading venues, the so-called over-the-counter business. Here, too, the compromise accommodates the skeptics surrounding Germany by excluding over-the-counter contracts from the price limit.

A final agreement on Monday would also clear the way for the adoption of other, actually undisputed, plans to lower gas prices. In the coming year, the member states are to jointly order part of the gas for their storage facilities. This is to prevent countries from outbidding each other and driving up prices, as happened last summer. In addition, approval procedures for solar roofs, heat pumps and the modernization of wind farms are to be drastically shortened. That would reduce gas consumption. The cap fans among the governments only want to approve these initiatives if the price cap is passed at the same time.

In addition, the heads of state and government discussed on Thursday how the EU should react to the US government’s massive subsidy package. The so-called Inflation Reduction Act (IRA) promotes the green transformation of the economy, but disadvantages European companies that want to export environmentally friendly products to the USA, such as electric cars. Because President Joe Biden wants to support American factories in particular with the program. Therefore, EU companies could relocate plants to the US. the Commission suggeststo relax subsidy rules and provide more EU funding in response to Biden’s law. In the conclusions of the summit, the top politicians now call on the authority to present comprehensive proposals by the end of January.

The German electricity and gas price brake must also be approved by the Bundesrat after it has been passed in the Bundestag. That should happen this Friday. The brakes are to apply to private households and small companies from March, with retrospective relief for January and February.

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