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The Green Brief: The last piece of the EU’s energy crisis puzzle

Europe has been mired in an energy crisis for a year. Month by month, it has spiralled deeper into the abyss of falling gas supplies pushing up the price of electricity. And, month by month, EU countries have desperately tried to prevent those bills from hitting EU businesses and consumers too hard.

As the situation worsened, the initial paper-over-the-cracks measures (like last year’s toolbox), transitioned into bigger impositions on EU countries, like demand reduction plans, and are now approaching monumental shifts in EU energy policy.

EU leaders met to discuss high energy prices on Friday (7 October), based on a letter sent by European Commission President Ursula von der Leyen, which suggested a range of possible new market interventions to tackle the crisis.

“It was very clear that we need to find this last piece of the puzzle of the energy issues and come up with the solutions [for] the negative impact of high gas prices on the overall energy prices in the EU,” said a senior EU official, referring to the conversation between leaders.

That missing puzzle piece is likely to be decisive in Europe’s response to the energy crisis. With calls for a price cap on gas and decoupling it from electricity, pressure is increasing on Brussels to simultaneously protect and break the EU’s energy market.

The European Commission is stuck between a rock (its lovingly created cross-Europe, liberalised energy market) and a hard place (the governments hammering on the door, demanding that Brussels rework it).

Like a child who needs to reuse their Lego bricks for a new project, the Commission is left looking sadly at its energy market model, wondering how to use the pieces to make something new.

Over the coming weeks and months, we’ll see just how far the European Commission is willing to go – or be pushed – when it comes to intervening on the EU’s energy market.

On Wednesday, EU energy ministers will have an informal meeting in Prague to build on the work of EU leaders last week and task the Commission with coming up with another proposal. With other policy options exhausted, the proposal is likely to be the furthest intervention into the EU energy market we’ve seen so far.

The following week, Brussels is expected to table this proposal. Ministers will then discuss it in Luxembourg on 25 October but are unlikely to come to an agreement due to the complexity of the legislation. Because of this, the Czech presidency is already pencilling in an emergency meeting of energy ministers (yes, another one) in November to adopt the measures.

Originally, the European Commission was trying to angle the emergency measures away from its energy market. For instance, it suggested a price cap on Russian gas several times but was rebuffed by EU countries, forcing it to look at more intrusive measures.

In a letter to EU capitals last week, European Commission President Ursula von der Leyen suggested a price cap on gas used for electricity production, but added that any such measure would need to be complemented by a mechanism to prevent encouraging further demand for gas.

The Commission chief also floated the idea of a price cap on imports. She carefully framed this as a temporary stop-gap solution until a wider reform of the energy market can take place.

That wider reform is expected early next year, with Brussels to put forward ideas by the end of 2022. But again, it is yet to be seen how much the Commission is willing to rip up its energy market.

At their meeting on Wednesday, EU energy ministers will look at potential reform, with a key area being how far EU countries want to go in making structural changes, said a senior EU official.

But, at the end of the day, there is only so much policy changes can do to tackle a supply-driven crisis. Diversification of supplies and demand reduction will remain Europe’s best friends throughout the coming winter as well as the following ones.

Source: Euractiv

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