EU Leaders Brush Off Calls for Quick Fix to Surging Power Prices
(Bloomberg) -- Several European Union leaders warned against hasty intervention to address the surge in energy prices, as pleas for immediate action from some of the bloc’s poorer countries went unheeded.
Record power and gas prices were the first topic for EU leaders in their two-day summit that started on Thursday in Brussels, but the bloc’s ability to act is extremely limited. While most countries have already cut taxes or approved subsidies to help households and companies, some want new measures on emissions, power and gas or even to scale down climate reforms.
“We need to distinguish significantly from the challenge we face in the fight on climate,” German Chancellor Angela Merkel told reporters before the meeting. “I think that we should react in a level-headed way.”
The energy crunch is exacerbating divisions among member states at a time when the 27 nations are starting crucial talks about how to decarbonize their economies under the Green Deal. The EU wants to lead the global fight against climate change and set an example for other major emitters such as the U.S. and China, but this summit will underline how far apart the members are in agreeing on their own energy transition.
The EU climate plan is “not in danger,” Belgium’s Alexander de Croo told reporters after the meeting. “But we need to have a long term perspective.”
French President Emmanuel Macron told fellow leaders that he expected the price hike to be prolonged, since there is nothing to signal a decline, according to an official who declined to be named on closed-door discussions. Macron said this reinforces the need for the EU’s plan to accelerate emissions reductions in the next decade, adding member states must invest more to reduce dependence on fossil energies.
He also stressed the need for member states to protect themselves against extreme volatility, mentioning transit routes, diversification and intensifying the climate plan, according to the official.
Italian Prime Minister Mario Draghi called on the European Commission, the EU’s executive arm, to propose as soon as possible a regulation on natural gas reserves, the official said. The aim should be that all EU members are equally protected, including from potential political pressure, Draghi added.
By the end of this year, the commission wants to propose a reform of the EU gas market, reviewing rules on storage and security of supply. It is also analyzing a proposal by member states including Spain and France to create a joint platform for purchasing emergency gas reserves, Energy Commissioner Kadri Simson said earlier this month.
While strengthening the energy supply security would help the EU in the medium and longer term, the current crisis is making things worse in the short term. It is pitting countries in the south and the east of Europe against the wealthier -- and often more climate-ambitious -- members in the north who argue the hike has nothing to do with European green policies. The 27-nation EU toughened its 2030 greenhouse gas-reduction goal to at least 55% from 1990 levels and aims for net zero emissions by the middle of this century.
The Greek government has estimated that the crisis will cost consumers an additional 100 billion euros ($117 billion) in the 2021-2022 winter season.
With electricity bills at risk of double-digit increases, the EU’s plans to ban new fossil-fuel cars by 2035 and put a carbon price on dirty home heating are an even tougher sell. The European Commission’s proposal to extend emissions trading to heating and transport fuels has become the most criticized element of the July package to enact the new climate target.
The EU’s existing carbon market, the Emissions Trading System, is also blamed by countries including Poland and the Czech Republic for aggravating the energy crisis. The government in Warsaw wants to restrict access to the market to some financial investors to curb speculation and prevent further increase of pollution costs.
In a gesture to placate Czech Prime Minister Andrej Babis, the summit communique underlined commission plans to look at possible speculation in the EU carbon market.
All the same, Finland defended the system and insisted investment in clean energy is the best long-term solution.
“We must not draw hasty conclusions, which could wreak havoc on the Emissions Trading System or otherwise worsen the situation,” Finnish Prime Minister Sanna Marin told reporters. “The big conclusion for the future needs to be more self-sufficiency and more renewables.”
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