Soaring energy prices climb EU’s political agenda

European Commissioner for Energy, Kadri Simson, delivers her speech about European solutions of the rise of energy prices for businesses and consumers at the European Parliament in Strasbourg, eastern France, 06 October 2021. [EPA-EFE/Jean-Francois Badias]

The European Union said on Wednesday (6 October) it will examine the way its power market is run and consider proposals to revamp regulations within the bloc, as it seeks to keep plans to tackle climate change on track amid record-high energy costs.

European electricity and gas prices have rocketed this year as tight gas supplies have collided with strong demand in economies recovering from the COVID-19 pandemic.

Energy prices topped the EU’s political agenda on Wednesday, with environment ministers and the European Parliament each debating the issue after country leaders discussed possible responses on Tuesday.

‘Toolbox’ of measures

The crisis has divided member states over whether and how Brussels should intervene.

“There is no question that we need to take policy measures,” EU Energy Commissioner Kadri Simson told the European parliament in Strasbourg.

The Commission will next week publish a “toolbox” of options for how governments and the EU could react. It will also launch a study into whether the EU’s power market is fit to deliver the bloc’s planned transition to green energy, Simson said.

EU countries agreed on Wednesday to wait for the Commission toolbox before considering a joint EU response at a summit on 21-22 October. Some governments have already rolled out national subsidies and tax breaks to cut consumers’ bills.

Spain and France have led calls for a revamp of EU electricity regulation to decouple the price of power from the cost of gas, and joint gas buying to increase EU countries’ bargaining power in global markets.

Spanish Prime Minister Pedro Sanchez said he and other countries had asked Brussels to offer an “audacious” response. “We need extraordinary, innovative measures,” he said.

France, Spain urge pan-European response to energy price surge

France and Spain on Monday (4 October) called for a coordinated European response to the surge in global energy prices to protect Europe’s poorest citizens, the competitiveness of its businesses and its 2050 plan to cut greenhouse emissions.

Markets in the spotlight

Not all countries agree. EU regulators expect gas market conditions to ease next spring, and some states warned against rushing into action that would have lasting consequences.

“Trying to influence the free market is something we are highly sceptical about,” German Environment Minister Svenja Schulze said.

The Netherlands cautioned against interfering in Europe’s power and CO2 markets, while Belgium said it was “not convinced” joint gas buying would help fend off soaring prices.

“I don’t think that we should arouse false expectations. We can’t really do any more than we’re already doing,” Portuguese Environment Minister Joao Pedro Matos Fernandes said.

Greece, for its part, has proposed an EU-wide mechanism for hedging against steep gas price fluctuations and help households tackle rising energy prices.

The European Commission heeded those calls, with President Ursula von der Leyen saying EU leaders will discuss strategic gas reserves and the decoupling of electricity prices from gas prices during a summit on 21-22 October.

“If electricity prices are high it is because of the high gas prices, and we have to look at the possibility to decouple within the market, because we have much cheaper energy like renewables,” von der Leyen said on Tuesday.

The EU executive will also use a long-planned reform of EU gas market rules, due in December, to review issues around storage and security of supply, Simson said.

EU points to upcoming gas market reform in response to price surge

The European Commission will use a long-planned reform of EU gas market rules, due in December, to address the current supply crunch on the market. This is according to the EU’s energy chief who added there are sufficient reserves to last the winter.

Ministers rally behind green goals

The price spike has arrived as the EU prepares to upgrade its policies to tackle climate change. It has stoked concerns among countries including Poland and Romania that steps to increase the cost of polluting fuels could add to households’ bills.

Analysts have said gas prices are the main driver behind surging power costs in Europe, while the cost of permits in Europe’s carbon market has contributed up to a fifth of the increase.

Brussels maintains that its climate plans will cut bills by reducing their exposure to volatile fossil fuel prices and that if countries fail to quickly cut emissions they could face far greater costs in the form of deadly floods, heatwaves and wildfires.

“Let’s keep our eye on the ball. The problem here is the climate crisis,” EU climate policy chief Frans Timmermans said. “The quicker we move towards renewable energy, the quicker we can protect our citizens against high prices.”

Blaming high gas prices on the green transition would be “totally wrong”, added Kostas Skrekas, the environment minister of Greece. ” The green energy strategy ultimately leads to lower prices and lower emissions, which are necessary in order to protect our environment, to protect our planet for future generations,” he said.

Austrian environment minister, Leonore Gewessler, pointed to Europe’s dependence on Russian gas, saying it is “having an impact” on the current high prices.

“Our answer must be to break free from this dependence – through climate protection and ambitious renewable energy policies,” Gewessler said.

German environment minister Svenja Schulze agreed, saying the best way to tackle high energy prices is to expand renewable energies. “We will need gas as a transitional solution until we have sufficient renewable energies, but the future belongs to renewables,” she said.

“Nord Stream 2 is a transition.”

More renewables best answer to energy price surge, Brussels insists

A faster rollout of renewable energies such as wind and solar is the best response to recent spikes in gas and power prices, an EU official said on Wednesday (29 September), repeating earlier statements by the European Commission.

[Editing and additional report by Frédéric Simon and Kira Taylor]

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