Brussels sticks to transition amid price spikes

Record gas and power prices in Europe have raised critical questions over the region's energy resilience as it aims to accelerate its energy transition in pursuit of urgent climate goals, but national responses and potential plans for co-ordinated action so far show no sign of backsliding on climate goals.

"The problem is in the market conditions, with the highest demand in 25 years creating price hikes," EU climate action commissioner Frans Timmermans told EU environment ministers on 6 October. France's 2018 gilets jaunes protests, sparked by fuel tax rises, are clearly on EU politicians' minds. But "the levels of social unrest, if we leave the climate crisis untackled, are going to be unsupportable", Timmermans says. "The problem here is the climate crisis. Europe needs to lead, so the rest of the world understands where we need to go."

Europe's energy price crisis focused the attention of ministers meeting to discuss European Commission legislative and policy changes intended to align EU emissions trading scheme (ETS) sectoral emissions reductions with the bloc's updated overall net greenhouse gas reduction target of 55pc by 2030, against 1990.

Some coal-dependent EU members have suggested that recent record-high EU carbon prices are playing a role in the energy price spikes. But revising the ETS will do little to tackle higher energy prices, Timmermans says, reacting to growing calls for changes to power and gas market legislation. The ETS is only responsible for up to 20pc of the higher energy prices, he says.

Among more direct responses, Spain is calling for a centralised European platform for buying natural gas, arguing that Europe should reproduce the model used to centrally purchase Covid-19 vaccines. EU officials have been sceptical of common gas purchasing, raising questions tied to the bloc's competition law. But Spanish economy minister Nadia Calvino Santamaria says there is increasing interest in a co-ordinated EU approach and that EU leaders will discuss proposals on 21-22 October. It "would allow us to negotiate with a single voice at European level towards major international gas suppliers", she says.

Russia is key among those suppliers, and Russian president Vladimir Putin has blamed current high gas prices in Europe on EU energy policies, offering Russia's "new pipelines" as part of the solution. Russia insists that it cannot increase supplies to Europe because it is producing at close to maximum levels and faces high domestic demand, but Putin has appeared to hint at the possibility of increasing supply through new routes such as the 55bn m³/yr Nord Stream 2 pipeline.

Align of fire

French economy minister Bruno Le Maire calls for improved regulation of gas markets and storage, and a "direct link" between average power generation in EU countries and prices paid by consumers — either through long-term contracts or regulated tariffs. "We can no longer accept electricity prices being aligned with gas prices. This is a dead end for the fight against climate change," he says. EU energy commissioner Kadri Simson plays down the role of climate policies or EU energy market rules on energy price rises. "Wind and solar have continued to generate the cheapest electricity in Europe in recent months," she says.

The commission, with EU energy regulator Acer, will launch a study of the power market's design, while Simson will propose gas market reforms later this year. But a leaked policy document to be put forward by the commission to tackle rising prices includes few new measures. The commission will only "explore" Spain's idea of "voluntary joint procurement of reserve gas". To support consumers, officials encourage countries to use revenues of €30bn ($34.7bn), expected in 2021, from auctioning 580mn emissions trading allowances.

By Dafydd ab Iago