EU Lawmakers to Tackle Energy Crunch as Calls for Action Grow

Ewa Krukowska and Nikos Chrysoloras
Thu., September 30, 2021

EU Lawmakers to Tackle Energy Crunch as Calls for Action Grow


(Bloomberg) -- The unprecedented spike in European Union energy prices is amplifying concerns about public support for the world’s most ambitious climate reform and reshaping agendas for key political meetings.

The crisis is set to be debated by environment ministers on Oct. 6 following Poland’s call to carefully consider its impact on a planned green economic overhaul, two diplomats with knowledge of the matter told Bloomberg Wednesday. The energy crunch hijacked a gathering of energy ministers last week and is also expected to be discussed at a summit of EU heads of government next month.

“Energy prices are currently soaring across the EU and putting unprecedented pressure on both energy companies and on our citizens,” the Polish government said in a note seen by Bloomberg News. “When designing energy and climate policies, we have to ensure their social acceptability, otherwise we risk their failure.”

The surging costs of power, natural gas and carbon-emission permits are threatening to inflict double-digit percentage increases on consumer electricity bills, prompting EU member states to employ unorthodox measures to blunt the impact. Greece promised to subsidize power bills and suggested creating a carbon-market fund to hedge against rising prices. Spain wants to slap a windfall tax on utilities and proposed a central platform for natural gas purchases.

The same day as the environment ministers discuss the energy crunch at their meeting in Luxembourg, the European Parliament will tackle the issue at its plenary sitting. Lawmakers gathered in Strasbourg will hear statements from representatives of the European Commission and member states on “solutions to the rise of energy prices for businesses and consumers,” according to a draft agenda of the session seen by Bloomberg News on Thursday.

The debate on immediate actions to tackle the crisis comes as European policy makers start negotiations on exact steps to reach the region’s new binding goal of reducing greenhouse gases by at least 55% by 2030 from 1990 levels. In a set of draft laws known as “Fit for 55,” the European Commission proposed measures from putting a price on emissions from heating and transport fuels to a ban on new combustion-engine cars as soon as 2035.

Talks on the package, which also includes a 72-billion euro ($84 billion) fund to help the most vulnerable households, micro enterprises and transport users, will take around two years. The laws require support from the EU Parliament and member states in the Council of the EU to be approved, with each institution entitled to propose changes.

“The social context clearly needs to be at the heart of our discussion on the Fit for 55 proposal, but the current situation shows that vulnerability to high energy prices is a major problem that has to be tackled now – not in a few years’ time,” the Polish government said.

Low gas inventories in Europe, ebbing pipeline imports and strong Asian demand driving liquefied natural gas (LNG) cargo diversions form a constructive backdrop for regional wholesale gas prices into heating season. Tapering domestic output, competitive global LNG markets and increased gas burn for power generation amid carbon-price volatility may keep balances tight in 2022 as a post-pandemic recovery unfolds.

Poland wants a two-fold approach by the EU: offering flexibility for member states to introduce immediate measures to protect consumers, and ensuring long-term mechanisms to reduce energy poverty in the region.

It also called for urgent measures to curb the influence of financial investors in the EU Emissions Trading System and urged Brussels to be “assertive” when faced with unfair gas-market practices.

Gas and power prices are breaking records as European economies rebound from the Covid-19 pandemic. The demand surge coincides with limited gas imports from Norway and Russia. Some countries accuse Moscow of manipulating supplies to boost pressure on the EU to secure approval for the controversial Nord Stream 2 pipeline, which would bring more Russian gas under the Baltic Sea to Germany, circumventing Ukraine.

“We cannot allow any producer to abuse his dominant position and treat gas supplies as a political tool,” the Polish government said. “Leaving existing pipelines and storage capacities largely unused in the midst of supply scarcity is a clear sign of market manipulation and a foretaste of what the EU can expect in the future.”

Even so, others disagree, including Uniden, a French group of energy-intensive manufacturers.

“Nord Stream 2 must be opened as soon as possible,” Uniden President Nicolas de Warren said, warning that otherwise some industrial plants will be forced to close because of high gas prices.

(Updates with European Parliament debate in the fifth paragraph, Uniden in last.)

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