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Friday, Mar 31, 2023

Gas price spat overshadows EU energy ministers’ effort to tackle price crisis

Gas price spat overshadows EU energy ministers’ effort to tackle price crisis

Member countries want to bring prices under control, but there are differences over the details.

All EU countries agree that the bloc has to take steps to cut soaring energy prices — but Friday’s emergency summit of energy ministers got bogged down in the details of how those policies would work.

According to the finalized meeting notes, obtained by POLITICO, ministers expressed support for several major policy proposals unveiled earlier this week by Commission President Ursula von der Leyen.

Those include: Taxing the windfall profits of producers not using expensive natural gas to generate power and a parallel profit clawback from fossil fuel companies also earning record cash; coordinating a reduction in bloc-wide power consumption; and providing “emergency liquidity instruments” to help energy firms meet sky-high collateral costs to trade on public exchanges.

“We managed to find a clear direction for the measures which need to be taken,” said Czech Minister of Industry and Trade Josef Síkela, who presided over the emergency Energy Council. “We now know exactly which road we need to take.”

But it's far from a done deal.

Ministers expressed general support for capping the price of natural gas in some form, but there was a spat over whether such a cap would apply to all imports or just those from Russia — as proposed this week by von der Leyen.

There was also disagreement over how to cut energy demand. The Commission wants that to be mandatory, but not all countries agree.

A request to relax state aid rules through the end of 2023 also figured prominently in ministers' asks — which would allow governments to rescue ailing firms faced with the fallout from the Russian war on Ukraine.

In addition to a global price cap, ministers also broached another idea not proposed earlier this week by von der Leyen.

They “called for sending a signal of confidence to the electricity market” by activating an existing emergency EU brake on automatic rises in wholesale power prices.

Those ideas are being sent to the Commission for further work.

“We will be proposing unprecedented measures next week for an unprecedented situation,” said EU Energy Commissioner Kadri Simson after the summit.


Gas price spat


The major tussle was how to push down the real-time price for natural gas — which has increased sevenfold compared to a year ago, and has led to a knock-on increase in power prices. The Commission only proposed capping Russian gas, but many countries want that to apply to all imports.

Italian Minister for the Ecological Transition Roberto Cingolani said 15 countries were in favor of a price cap on all natural gas, with just three insisting on a Russia-specific cap and eight other ministers either against, neutral, or worried about the economic impact.

“I think the gas price cap is from the market point of view the most difficult case,” Síkela said.

Berlin, Amsterdam and the Commission aren't keen on the idea.

If you put a price cap on gas, “then you have a big chance of having gas shortages. If you push the prices down, the effect is usually that the suppliers go somewhere else. And we want to hit Putin,” said Dutch State Secretary for the Extractive Industries Hans Vijlbrief.

The concern was echoed in Germany, where Chancellor Olaf Scholz said: “The solutions and the proposals are therefore not as obvious as they appear to some people."

Even singling out Russia is a step too far for some.

“We will not agree to this,” said Belgian Energy Minister Tinne Van der Straeten, saying a Russian-only cap had no “added value.”

A spokesperson for Hungary’s Foreign Minister Péter Szijjártó said: “A price cap on Russian gas is absurd.”

Simson said the Commission would work with countries worried about a vengeful Moscow cutting off their gas to find alternative supplies.

Despite those differences, French Energy Minister Agnès Pannier-Runacher was optimistic that there was "a common desire to move forward."

"It's a very strong message sent to the markets to avoid financial transactions on the gas market which appear to be gaming rather than corresponding to any physical reality of energy flows," she said.

The goal is to get concrete legislative proposals together by the time von der Leyen gives her annual State of the European Union speech next Wednesday.

“Nothing is decided yet,” said Simson. “So I do believe we will have a busy weekend and also first days of the next week before the final product and the Commission’s package will be really ready.”

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