Europe Plans Push to Cut Dependence on Russian Natural Gas

(Bloomberg) -- The European Union’s executive arm will step up efforts to reduce the bloc’s reliance on Russian gas following President Vladimir Putin’s invasion of Ukraine.

The EU’s dependence on Russia as the biggest single supplier hurtled up the political agenda after the invasion last week sent shockwaves through energy markets. Russia’s control of more than 40% of deliveries to the EU aggravated already high energy prices, the European Commission said in a revised draft of the strategy, seen by Bloomberg News on Monday.

The energy crisis and the invasion of Ukraine, a transit country for gas flowing to the EU, came at a very sensitive moment in the European green overhaul, with member states debating a set of ambitious laws needed to meet a stricter climate goal. The reforms will already lead to a reduction in the EU’s reliance on gas by 23% by the end of this decade, according to the Commission’s blueprint, which may still change before publication. 

“At high gas prices, coordinated action could further reduce EU dependency,” the Commission said in the document, tentatively set for adoption on March 8. “We propose a set of joint actions to overcome our over-dependence on external gas supplies by unlocking increased investments and reforms for more affordable and sustainable energy production and by further diversifying supplies.”

The EU executive plans to call on member states to implement the climate and energy package as soon as possible. It will also push for further diversification of energy suppliers and tougher gas storage requirements.

Here are some of the actions outlined in the blueprint:

• Stronger dialogue with partners on liquified natural gas, including talks with major buyers, such as Japan, South Korea, India and China “with a view to avoiding conflictual market practices in the future”
• A New Energy Compact to mobilize additional investment in renewables and simplify permitting procedures
• A strategy in June to accelerate deployment of solar energy
• A push for quick implementation of energy efficiency measures
• A recommendation to produce 35 billion cubic meters of biogas by 2030
• Accelerating the deployment of renewable hydrogen
• A push for introducing minimum gas reserves by national governments to ensure the EU average level of storage filling of at least 80% by Sept. 30
• Guidance for member states on power-price intervention to protect the most vulnerable consumers
• Amended guidance on the use of state aid for companies affected by high energy prices
• A plan to boost transparency in the carbon market

The challenge is that unlike in areas such as competition or financial affairs, energy policy is largely in the hands of member states. The ambitious climate reforms, which the Commission sees as the best solution to the energy crisis, also need backing from national governments. 

Some member states and companies are already calling for a rethink of the Fit for 55 package amid soaring energy prices. Poland’s climate minister Anna Moskwa said on Monday that that green plan was no longer valid and the EU should focus on energy security as well as achieving climate goals. At the same time, countries including Ireland and Denmark urged stronger resolve in the transition to a sustainable economy.

“Diversifying supplies, frontloading renewable energy and improving energy efficiency is the best insurance against price shocks,” the Commission said in the draft energy blueprint. “The EU and its member states should take resolute steps together.”

©2022 Bloomberg L.P.