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For many, the protracted debate on whether to place a cap on gas prices in the European Union should have been settled already months ago.
After all, Spain and Portugal have already implemented a price cap on gas used for electricity generation since April, with the blessing of Brussels – albeit reluctantly.
The debate looked settled last month when European Commission President Ursula von der Leyen threw her weight behind a price cap on gas as a “temporary solution” to the energy crisis until the EU executive develops a new price index that better reflects the growing importance of liquified gas on the EU market.
But last week, the Commission made a surprise U-turn.
After supporting the idea of a “dynamic” price ceiling, and suggesting it was ready to support the extension of the Iberian mechanism to the rest of Europe, the EU executive appeared to be dragging its feet once more.
In a “non-paper” circulated to EU capitals on the eve of an extraordinary Energy Council meeting last week, the Commission contradicted all its recent political declarations.
A price cap on gas used for electricity, it argued, risks pushing gas demand even further and worsening “the already difficult situation as regards gas security of supply”.
Artificially low prices would also risk increasing flows of subsidised electricity to non-EU countries and push up gas consumption even further, by 5 to 9 billion cubic meters (bcm), the paper warned.
Moreover, the benefit of an EU-wide price cap would not be distributed evenly among EU member states, the paper argued, with France expected to be the biggest net beneficiary, while the Nordics, the Baltic states, and Eastern EU countries were expected to lose out.
The result of the Commission’s move was to sow confusion and, ultimately, delay any decision.
That may have been the intention. The timing of the paper’s publication, on the eve of the Energy Council, raised eyebrows among the 27 national delegations. Confused diplomats even turned to EURACTIV to ask what was our reading of it.
Most annoyed among them was Czech Energy Minister Jozef Sikela, who was chairing the meeting and criticised the EU executive for its handling of the file, saying “it is clear that the Commission and maybe a few member states do not see an Iberian model as a way forward”.
With gas prices receding on the back of full storages and a warm autumn, Brussels now seems to be playing for time, saying it could make a proposal for a gas price cap “this winter already if we get the mandate” from the 27 EU member states.
Given the elusive consensus among EU countries, this seems rather like kicking the ball into the long grass. Germany and the Netherlands, in particular, are opposed to any kind of price cap, warning it would limit the ability of companies to buy gas on the market.
Brussels is undoubtedly receptive to those warnings. For almost two decades now, it has been trying to build a European energy market and putting up new barriers – like a price cap – risks undoing those years of patient work.
But there is probably also a more fundamental reason behind the Commission’s reluctance to intervene in the energy market: Brussels sees the current crisis also as a massive opportunity to push forward its European Green Deal.
Since 2005, the Commission has worked tirelessly to establish an EU-wide carbon market that puts a “price signal” on polluting fossil fuels. And with the ongoing energy crisis, the price signal is working like never before, pushing the European Union to consider unprecedented plans to bolster energy efficiency and drive renewable energies forward.
Across Europe, gas consumption has already fallen 7% compared to the 2019-2021 average, according to Bruegel, a think-tank. Across the EU, people are looking for ways to reduce their energy consumption by insulating their homes or ditching their gas boilers to buy a heat pump.
“You know, my mom talks about this. Her friends talk about it. On everyone’s mind is: ‘how can I save energy?’,” the EU’s climate chief Frans Timmermans said at a recent event on energy efficiency.
And the reason they’re doing that is not because they want to save the climate, he pointed out. “The main reason is that they can’t afford to pay their energy bills anymore.”
Of course, EU member states will need all the support they can get to address the social consequences of the crisis, Timmermans continued.
“But let’s make sure we address it in a way that is consistent with our long-term goals in terms of our energy transition,” he insisted.
In other words, don’t kill the price signal now that it’s finally delivering.
“The era of cheap fossil fuel is over. For good. It will not come back,” Timmermans stressed.
– Frédéric Simon
The Green Brief is changing! After more than a year and a half sending our weekly bulletin, we’re giving it a makeover, cutting it down in length to bring you only the essential. But fear not, if you’re an avid reader and don’t want to miss a thing, you can sign up now to our new Energy & Environment Daily update here as well as our existing weekly news round-up here. Let’s keep in touch!
More:
- Despite conflict, Russia sends France giant magnet for nuclear fusion project
- Kyiv prepares 1,000 heating points as Russia attacks energy infrastructure
- EU rails at ‘discriminatory’ tax breaks for US-made electric cars
- In Brazil, Lula’s victory raises hope for Amazon rainforest
- Putin says Turkish gas hub can easily be set up, reveals Nord Stream damage details
- Berlin to table fix-all climate ‘law’ ahead of world climate conference
- Top US gas exporter eyes Europe growth, ‘with the right contracts’
- Russia says UK navy blew up Nord Stream, London denies involvement
- Automotive industry sceptical of post-2035 rules for cars
- Germany’s North-South renewables divide is intensifying
- France to plant 1bn trees by 2030
- Germany’s North-South renewables divide is intensifying
- Steelmakers frustrated with slow start of EU green hydrogen production
- Brazilian elections: Lula’s victory to revive EU-Mercosur agreement
- French lawmakers approve government pick for new EDF boss
- Poland’s power grid needs €25 billion upgrade for renewables: report
- Scientists call for ‘climate smart’ forestry in face of global warming
- Gas price cap ready ‘this winter’ if countries agree, says EU energy chief
- Climate pledges still ‘nowhere near’ enough for 1.5C: UN
- Western officials finalising plans for Russia oil-price cap
- Poland’s energy transition will cost €135bn by 2030, report finds
- EU announces €500 million energy support package for Western Balkans
- Europeans lose faith in governments to prevent climate catastrophe
- Franco-Iberian ‘Green Energy Corridor’ of ‘dubious concreteness’, expert says
- French city develops self-consumption of energy, with EU backing
- Climate action ‘biggest public health opportunity of the century’, says report
BERLIN. German regional chief: Russian gas should be used after war. Germany should use Russian gas once the Ukraine war is over and keep nuclear plants running indefinitely, Saxony’s Prime Minister Michael Kretschmer said during Climate Action Minister Robert Habeck’s visit to the region on Tuesday. Read more.
MADRID. Spain’s electricity bill is more than double compared to EU-27 average. Electricity prices in Spain rose by 32.2% during the first half of 2022, an increase of more than double the average of other EU countries (13%), compared to the same period the year before, according to a publication by Eurostat. Read more.
LISBON. Portuguese PM to attend COP27 to discuss inclusive transition, climate finances. Prime Minister António Costa will advocate for a more inclusive transition and a more balanced distribution of climate finance during his attendance at the United Nations Climate Change Conference (COP27) in Sharm el-Sheikh, Egypt, on 7 and 8 November. Read more.
SOFIA. Commission warns Bulgaria not to circumvent EU oil sanctions. The Russian company Lukoil, owner of Bulgaria’s only refinery, should not try to circumvent the EU embargo and sell oil products produced from Russian oil abroad, a spokesperson of the European Commission told Bulgarian journalists in Brussels. Read more.
ZAGREB. Croatia’s sole oil refinery goes offline for five-month overhaul. Croatia’s only oil refinery will suspend its operations for a planned modernisation that will last from November until early April, the national oil concern INA said on Tuesday. Read more.
PARIS. French PM confirms tripartite talks over future pipeline deal with Portugal, Spain. Conversations continue over a future interconnection deal – known as the BarMar deal – French Prime Minister Elisabeth Borne said on Saturday, with a tripartite meeting due to take place in December. Read more.
VIENNA. Austria secures winter gas supply. Austria’s gas storage reserves are at 90% capacity, implying Austria’s annual consumption is secured as the government touts its efforts to diversify gas suppliers, acquire extra gas, and fill gas storage facilities. Read more.
WARSAW. EU may block Polish nuclear investment, warns opposition. After a contract with American Westinghouse company to build the country’s first nuclear plant was announced by Prime Minister Mateusz Morawiecki, the Left opposition warned that the investment could face problems due to non-compliance with EU rules. Read more.
TIRANA. Albania’s energy situation not good, EU money will help. The energy situation in Albania remains concerning due to a lack of rain, but money from the EU will help, said Prime Minister Edi Rama during a meeting with Commission President Ursula von der Leyen on Thursday (27 October). Read more.
MADRID. Spain urged to immediately restore electricity to Madrid shantytown. Spain must immediately restore electricity supplies or offer alternative accommodation to residents of a shantytown on the outskirts of Madrid, where some 4,500 people, including around 1,800 children, struggle for light and heating due to power outages, a Council of Europe committee ruled Thursday. Read more.
BRUSSELS. Oral hearings in Belgian nuclear reactors closure case to start next year. The Brussels First Instance Tribunal on Thursday ordered parties in the case brought by citizens and non-profits who oppose the country’s nuclear phase-out plans to exchange written statements for December and January, meaning the first oral hearings will take place in March or April 2023. Read more.
VIENNA. Austria snags UAE gas deal, matching Germany’s. To diversify the gas supply and reduce dependency on Russian imports, the Austrian government closed a deal with the United Arab Emirates (UAE) for an amount of gas similar to what Germany receives. Read more.
SOFIA. Bulgaria announces end of fuel rebate scheme. The fuel rebate scheme that currently gives Bulgarians 12.5 euro cents for every litre of fuel filled at the petrol station will stop from 1 December, Finance Minister Rositsa Velkova announced. Read more.
PRAGUE. High energy prices lead to massive layoffs, Czech experts warn. Inflation and high energy prices will lead to further company redundancies, experts warned after 13 Czech companies announced mass layoffs in August and September. Read more.
LISBON. Franco-Iberian ‘Green Energy Corridor’ of ‘dubious concreteness’, expert says. Plans to move on with “Green Energy Corridor”, which should connect Barcelona and Marseille, were criticised by the coordinator of the Iberian Energy Observatory. Read more.
Solar sector ‘very concerned’ about EU electricity market reform plans. Solar Power Europe, an industry association, has warned the European Commission against an emergency price cap on gas used for electricity production as well as longer-term plans to reform the EU power market.
The industry group shared its concerns in a letter sent to the EU executive on 28 October. “We are very concerned about some of the proposals in the non-paper,” the association writes, referring to a document shared by the European Commission last week where the EU executive considers policy options to reduce energy prices for consumers.
SolarPower Europe in particular rejects a suggested reform of the EU electricity market that would see renewables like wind and solar moved outside the market and placed into mandatory Contracts for Difference. “Although CfDs have been, and still are, very beneficial to drive the deployment of renewables, relying on administrative measures only is not the right way forward,” the letter argues, saying it risks “crowding out investors” and stifling innovation.
According to SolarPower Europe, the current market design works well and shouldn’t be tampered with. “Changing the rules of electricity markets overnight, or even just feeding the debate with non-papers has a chilling effect on investments and will slow the energy transition,” the letter warns. The full letter by SolarPower Europe can be downloaded here and the Commission non-paper here. (Frédéric Simon | EURACTIV.com)
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EU unveils winners of 2024 European Green City Awards. The Spanish city of Valencia was nominated European Green Capital of the year 2024, while the cities of Helsingør in Denmark and Velenje in Slovenia won the EU Green Leaf award.
The title was granted during a ceremony on Thursday (27 October) in the French city Grenoble, which is the Green Capital of the year. The award is given to recognise local efforts to improve the environment and quality of life in cities.
“These cities are working hard to build a healthier and greener environment for their residents and are an inspiration to others,” said Environment Commissioner Virginijus Sinkevičius. “Cities are at the forefront of the green transition and with the progress made so far, I truly believe that we can build a greener and fairer Europe for all,” he said when announcing the winners.
The prizes will support the cities’ planned green work: Valencia will receive €600,000 and Elsinore and Velenje €200,000 each. (Valentina Romano | EURACTIV.com)
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EIB unveils €30 billion investment plan for clean energy. The European Investment Bank (EIB) announced a new plan on Wednesday (26 October) that will see additional loans and equity financing for investments in energy efficiency, renewables, grids, electric-vehicle charging infrastructure, storage, and breakthrough technologies such as low-carbon hydrogen..
The €30 billion plan will be rolled out over the next five years in support of the EU’s REPowerEU plan aimed at ditching Russian fossil fuels as quickly as possible. With help from private finance, it is expected to mobilise up to €115 billion in total, the EIB said. More detail on the EIB website here. (Frédéric Simon | EURACTIV.com)
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IEA chief: Global LNG markets to further tighten next year. Global liquefied natural gas (LNG) markets are set to tighten further next year, as Europe’s imports increase and China’s appetite may rebound, the head of the International Energy Agency (IEA) during the Singapore International Energy Week. He warned that only 20 billion cubic metres of new LNG capacity will come to market next year, and that the world is in the middle of “the first truly global energy crisis”. (EURACTIV.com with Reuters)
29 NOVEMBER. The EU methane regulation after REPowerEU – How energy security and methane action go hand in hand. In 2021, the European Commission proposed the Methane Regulation, the first EU-wide legislation aimed at cutting methane emissions. Since then, the file has stalled in the European Parliament. This event is designed to highlight the importance of the regulation, examine the approaches, and to reflect on the radical shifts in the European policy landscape as a result of the Ukraine situation and the Commission’s RePowerEU plan in response. Programme and registration here. (Organised by Clean Air Task Force in media partnership with EURACTIV).
7 DECEMBER. EU Energy Transition – what role for critical raw materials? The European Commission, together with relevant stakeholders, is working on different action plans and initiatives to address critical raw materials in supply chains. Join this EURACTIV Virtual Conference to discuss the role of critical raw materials in ensuring a fast and ambitious energy transition across Europe. Programme and registration here. (Supported by Nickel Institute).
NOVEMBER
- 6-18 NOVEMBER. UNFCCC conference (COP27) in Sharm El-Sheikh, Egypt.
- 9 NOVEMBER. Development of post-Euro 6/VI emission standards for cars, vans, lorries and buses.
- 9 NOVEMBER. Second round of trilogue negotiations on EU deforestation law.
- 14-25 NOVEMBER. Conference of the Parties – CITES, Panama (COP19).
- 15-16 NOVEMBER. G20 meeting.
- 24 NOVEMBER. Extraordinary Energy Council.
- 30 NOVEMBER. Circular Economy Package 2:
- Proposal for a Regulation on substantiating environmental claims using the product / organisation environmental footprint methods (green claims)
- Policy framework for bio-based, biodegradable and compostable plastics
- Review of the Packaging and packaging waste Directive to reinforce the essential requirements for packaging and establish EU level packaging waste prevention measures and targets
- Carbon removal certification
DECEMBER
- 5-17 DECEMBER. UN Biodiversity Conference (COP15). Montreal, Canada.
- 15-16 DECEMBER. European Council.
- 19 DECEMBER. Energy Council.
- 20 DECEMBER. Environment Council.
[Edited by Zoran Radosavljevic and Frédéric Simon]