This article is part of our special report Energy poverty.
The energy crunch has highlighted the high share of taxes paid by consumers for their gas and electricity. With the energy transition expected to cause further volatility on fossil fuel markets, a shift in energy taxation is now becoming an urgent priority, according to rights group Euroconsumers.
Els Bruggeman is head of advocacy and enforcement at Euroconsumers, an organisation with members in Belgium, Italy, Portugal and Spain. Marco Pierani is public affairs & media relations director at Euroconsumers.
They spoke to EURACTIV’s energy and environment editor, Frédéric Simon.
Energy prices have risen across Europe, raising concerns about heating bills going up ahead of winter. Governments across Europe have taken measures to support vulnerable households during the crisis, so what is your assessment so far: have governments done the right thing and are European consumers well protected against rising prices?
Els Bruggeman: It’s true, the situation varies from country to country, and so far, the national measures being taken are very different.
However, they are all a reaction to a common trend in all EU countries caused by geopolitical problems with Russia not delivering sufficient gas or a lack of wind this summer.
Some argue this situation won’t last beyond Spring 2022. But probably it will happen again, especially when you consider the green transition. We will need much more flexibility in terms of gas backup in case of shortages of renewable energy. And with more renewables coming into the electricity grid, it is not excluded this situation could happen again.
Now, governments are obviously very different from country to country – some, like France, have distributed energy vouchers to consumers, others have implemented temporary tax reductions on electricity bills or offered social tariffs.
But this is just a patch – in the long run, we will need to have more structural approaches. Prices have quadrupled in some places, and consumers with variable contracts are particularly badly affected right now. For them, this is becoming a very pressing matter.
And it’s not just about vulnerable consumers, it’s also middle-class people who are also very much affected by rising energy prices. This is a huge problem, especially when you consider that we need the support of all of them to make the green energy transition happen.
What are the common problems and potential solutions for consumers across Europe?
Els Bruggeman: A common features we see in each country where Euroconsumers is active are the high taxes and all kinds of levies paid by consumers in their gas and electricity bills.
These are turning energy bills into an extra tax sheet. If we want to keep energy affordable for all consumers, especially during the green transition, we need to do something about this.
Whether you have a low or high income, the taxes and levies remain the same. This means reducing energy bills to what they are supposed to be – a payment for getting actual gas or electricity.
Making a tax shift is now becoming an urgent priority.
Marco Pierani: More generally, consumers at the moment have no real perception of price from the demand side, which is a problem if Europe wants to create an internal energy market.
We believe Europe should seize the occasion created by this crisis to push ahead of the energy transition and react as a single market. We think the approach should be to have a more consistent and harmonised European market and geopolitics.
The European Commission presented a toolbox of measures a few weeks ago. Do you believe this was an appropriate response from the European Union to the crisis? What more – if anything – could the EU have done?
Els Bruggeman: The toolbox contains a lot of good potential measures that can be adopted at the national or European level. The way out will probably be a combination of many measures.
However, if anything, we believe the best way forward is to become less dependent on imported fossil fuels.
What’s happening now is a bit of an eye-opener when it comes to the green transition. More than ever, it has become clear that the green transition must be a just transition. And if you don’t have everyone on board, including consumers, it’s not going to work.
This crisis has shown us that consumers are not prepared for this kind of increase in energy prices. And if we want and be ready for the next one, we need to have a broader rethink of how to manage the energy transition.
EU countries have very different poverty levels and different ways of approaching energy pricing – some have fixed tariffs, for example, while others have variable tariffs. How can the EU effectively respond to the crisis given those discrepancies?
Els Bruggeman: It’s worth having a closer look at the behaviour of suppliers. We noticed how energy providers could sometimes play with the energy pricing system – a bit similar to what banks do when they speculate on financial markets – allowing them to make a lot of profit.
However, responsible energy providers don’t rely completely on the wholesale market but anticipate changes in energy prices over the long run and use buffers as hedging strategies to offer more stable and affordable prices to consumers.
What is also clear is that, more than ever, we need to have a European internal market for energy with better interconnections and competition.
Marco Pierani: For us, market integration at the EU level should go alongside the transition to renewable energy. This is something that needs to be tackled today by the European Union at the highest political level.
Currently, governments are using public money to tackle the immediate effects of the crisis, but this is not sustainable in the long run. So we need to reshape the market. And the two levers we have is better integration of the energy markets and pushing ahead with the green transition.
Do you believe this crisis calls for an acceleration of the energy transition and can be a catalyser for it?
Marco Pierani: For sure, this crisis is an eye-opener. The economy has restarted, but the production and distribution of energy are not responding efficiently. This is a huge problem and an opportunity to further the integration of European energy markets, provided there is political leadership.
Els Bruggeman: From the EU perspective, it’s also a perfect opportunity to accelerate the adoption of energy and climate laws in the ‘Fit for 55’ package.
Some countries – essentially in the Eastern part of the EU – have blamed the European Green Deal and the EU carbon market for making the crisis worse. Do you agree?
Els Bruggeman: Holding on to old recipes is not the solution. The green transition is not the problem, on the contrary, we believe it is part of the solution. Because the only way to cut our dependency on volatile gas prices and geopolitical situations is to be self-sufficient and have enough renewables to provide energy to European consumers.
From a certain point of view, it might seem easier to fall back on old solutions. But it’s not the way forward, and we firmly believe the only way is to speed up the transition.
This crisis made us realise that this transition needs to be ambitious yet happen gradually, in a just and managed way.
With the green transition, the price of fossil fuels generally is likely to remain high and volatile in the long term. Do you believe social support measures will need to become permanent as a result?
Els Bruggeman: Consumers will always need to have access to affordable gas during the transition. But the long term goal is clear – it’s to have a more integrated EU energy market based on renewables and energy efficiency.
That said, there might be times when gas prices will be high and others when they will be really low. So the question is, how do energy providers position themselves in a market that is becoming more and more volatile?
One way for them to do this is to turn to the stock market and potentially make some big profits. But they can also use the price fluctuations to hedge their bets and ensure stable prices for consumers.
So, when talking about managing energy prices, we should also have a closer look at the responsibility of the suppliers.
Supporting vulnerable consumers in the short term often implies direct income support like the €100 energy vouchers that was decided in France. However, these are essentially subsidies for fossil fuel consumption. When do you believe these measures should be withdrawn?
Els Bruggeman: Yes, it’s necessary at the moment to support all consumers who are the most heavily impacted – not just the poorest or the most vulnerable.
However, in parallel, there must also be massive investments in longer-term solutions like building renovation, energy efficiency, solar panels, heat pumps, etc.
We don’t believe these are mutually exclusive; on the contrary, they should go hand-in-hand. But we know this is a gradual process and that it will take years to get legislation like the ‘Fit for 55’ package adopted and implemented.
The climate social fund, alongside the Just transition mechanism, was one of the flagship proposals of the European Commission to address social issues related to the Green transition. Do you believe this proposal provides an answer commensurate with the scale of the challenge when it comes to the social aspect of the energy transition?
Marco Pierani: The social responses should be more intense during times of crisis because energy is a fundamental right for consumers – they cannot be left without lighting or heating.
So, the EU climate social fund probably goes in the right direction, but we lack intensity and speeding up the implementation of projects. We also believe energy providers should have clearer obligations under the EU internal market to behave more responsibly towards consumers. We are stronger together, but we need to have a framework in place to support his ambition.
So essentially, you’re supporting the calls by Spain and France to have a more profound reform of the electricity market in response to the crisis?
Els Bruggeman: It’s not really about supporting one particular country or a specific point of view. But as a consumer organisation, being confronted every day with the real problems consumers are facing, it is our job to raise questions and have a closer look to see if everything is still working as it should.
On a more general note. Until now, a lot of attention went to protecting vulnerable consumers, and we fully support this, it’s very much necessary. But there is also the biggest group which is the middle class, who also need support. Probably the measures for them will be different, but they cannot be ignored.
Is the energy price crisis a wake-up- call for Europe that we should be phasing out gas more quickly?
Els Bruggeman: Yes, we believe so. Many were already convinced about this before this crisis came about. And for those who weren’t, I hope this will be a wake-up call.
We all realise it’s very unreliable to be so dependent on gas. And the only way to be less dependent is to rely more on the self-production of renewables. It’s a no-brainer – we need to do it for the climate anyway, and it has become even clearer with the crisis. But we need to do it in a just way, keeping all consumers on board.