What the EU plans to tackle high gas and electricity prices – economy

Joint purchase of gas, new rules for the electricity market: the European Commission is considering large-scale initiatives in response to the rapid rise in gas and electricity prices. At the same time, the debate reveals the differences between EU governments on energy policy. On Monday and Tuesday, EU finance ministers discussed the sensitive issue during their meeting in Luxembourg. Olaf Scholz was represented by his Secretary of State. But the most important statement of the day was made 1,600 kilometers further northeast, in the Estonian capital Tallinn.

There, Commission President Ursula von der Leyen announced at a press conference on Tuesday that it was necessary to examine whether and how the price of electricity could be decoupled from the price of gas. In addition, the heads of state and government are expected to deal with the EU’s strategic gas reserves at their summit in two weeks. Von der Leyens’ economic commissioner Paolo Gentiloni had previously told Luxembourg that his authority was considering joint gas purchases for member states – the results could be presented in mid-December, along with other laws from the EU. EU in the energy market. But it is still “too early” for the details.

Von der Leyen and Gentiloni take up the demands of Spain and France. The Spanish government maintains that the EU should follow the example of the success of the joint order of Covid vaccines. If the Union were to order gas in this way, it would have more negotiating power with suppliers and could build up strategic reserves that would help counter rapid price increases, according to Madrid.

In addition, Spain and France are pleading for a modification of the rules of the wholesale electricity market. Ahead of the meeting in Luxembourg, French Finance Minister Bruno Le Maire said he could “no longer accept that electricity prices are based on gas prices”. What is needed is “a direct link between the average cost of producing electricity in all countries and the prices paid by consumers”. The most expensive power station has so far set the price in European electricity markets.

France feels disadvantaged because prices are based on expensive gas-fired power plants

This translates into low prices when demand can be met with wind, hydro, solar and nuclear power plants that have very low operating costs. But at present, it is also necessary to burn expensive gas in power plants: this means that the prices of electricity increase with the prices of gas. French Minister Le Maire finds this particularly unfair because his country produces electricity at a relatively low price – thanks to the many nuclear reactors. However, as national average costs have not yet been a determining factor for the price of electricity, France’s prices are based on expensive gas-fired power plants “in Germany and elsewhere,” complained Le Maire in a speech last week.

Reforms of this system have been called for several times in the past – to no avail. But now Commissioner von der Leyen is also making the criticism his own. Your authority also wants to present next week a so-called toolbox: recommendations on how Member States can mitigate the consequences of high prices for consumers and businesses in the short term.

The guide was originally due to be presented on Tuesday, but the Commission wants to continue exchanging ideas with governments. Commissioner Gentiloni underlined during the ministerial meeting that it is important that these national aid programs are “time-limited and targeted” and “respect the internal market and the rules on subsidies”. The Spanish and Italian governments have already lowered energy taxes, while France has capped electricity and gas prices.

The fact that Gentiloni boss von der Leyen is also involved in the issue shows how seriously the Commission takes the gas price crisis. No wonder: after all, the debate on the impact on citizens could endanger parts of the Green Deal, the EU’s ambitious climate protection program. Ahead of the ministerial meeting, the Polish government warned that the EU now needs to think “deeply” about its social consequences regarding its climate protection package, such as the plan to expand emissions trading for include accommodation and transport. This Commission proposal would make gasoline, oil and gas more expensive for heating. Many governments have been critical of this anyway – even before the experiences of the past few weeks.

Paris promotes domestic nuclear power and presents it as a climate-friendly alternative

France also uses anger against gas as an argument to promote nuclear power. “If we want to win the fight against climate change, we need nuclear power plants and more investment in nuclear energy,” Le Maire said in Luxembourg. A point of contention within the EU is whether nuclear reactors should be seen as green investments. The Commission is currently developing a taxonomy, a comprehensive catalog of criteria that determines which economic activities are environmentally and climate friendly. In the coming weeks, the authority will present the legislative act on nuclear assessment, and Le Maire wants to influence this regulation in its favor. Other governments like Germany and Austria reject a green seal against nuclear reactors.

Apparently, the Commission is now considering creating a separate category for nuclear and gas power plants. They should not be seen as green, but as a necessary transitional technology with relatively low greenhouse gas emissions. The French government could live with this compromise, they say from Paris. Nevertheless, Le Maire continues to extol the benefits of nuclear energy for the EU. Prevention is better than cure.

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