How the gas price cap is dividing the EU

EU Energy Minister

Czech Energy Minister Jozef Sikela (2nd from left) spoke of a “rather heated discussion”.

(Photo: AP)

Brussels The EU energy ministers have postponed two emergency laws to deal with the energy crisis, although there is actually agreement on the matter. The reason is a blockade by countries that are demanding a gas price cap.

A group of at least seven member states is so dissatisfied with the EU Commission’s proposals so far that they did not want to formally decide on other projects. A law has been postponed that is intended to facilitate the expansion of renewable energies and electricity grids by placing the requirements of climate protection above other interests such as species protection.

In addition, a law on solidarity measures, which is intended to regulate that EU countries must supply each other with gas even in times of shortages, has now been delayed. This also includes the specifications for joint gas purchasing, which should lead to better purchasing conditions and thus lower prices for consumers.

It is sad that these important measures to combat the energy crisis are being taken hostage, according to diplomatic circles. The chairman of the round, Czech Energy Minister Jozef Sikela, spoke of a “rather heated discussion”.

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The formal passage of these laws is now scheduled for mid-December. However, it is unclear whether the reason for the blockade can be cleared by then.

The demand is to further develop the market correction mechanism proposed by the EU Commission into a real gas price cap that noticeably depresses the prices for electricity producers and consumers. However, the Commission only wants to intervene in prices if gas in Europe becomes extremely expensive and the price has decoupled from what is happening on the world markets.

>> Read here: Questions and Answers – Why Europe’s new gas price cap is not one

Specifically, their proposal provides that certain gas transactions above 275 euros per megawatt hour will be prohibited if the reference price in Europe is at least 58 euros above the world market price for at least ten days. Even in August of this year, when the EU countries panicked and bought up large quantities of liquid gas and outbid each other, these conditions were not met.

Harsh criticism of the EU Commission

Criticism of the commission was correspondingly harsh. “We don’t need any papers on solidarity or approval procedures now,” complained Polish Minister Anna Moskwa. “In Poland it’s already minus ten degrees.” Now, in winter, one has to talk about a gas price cap, other points can be postponed until spring. From their point of view, what the EU Commission had proposed was a “joke”.

Robert Habeck (centre left) with his European counterparts

Germany and a number of other EU countries, like the Commission, fear for security of supply if the EU sets gas prices permanently.

(Photo: Reuters)

The Spanish Minister Teresa Ribera also spoke of a “bad joke”. Instead of setting 275 euros as the limit, 150 to 200 euros are realistic, said Greek Minister Kostas Skrekas. There is no reason to accept that the price of gas in Europe is significantly higher than in other regions of the world.

However, the effects of a cap are assessed very differently, even among its proponents. Skrekas expects a calming effect on the markets even if the price is below the set limit. The discussion alone lowered the price, and an agreement would have an even stronger effect.

Germany is against a gas price cap in the EU

On the other hand, Ribera said that in the form presented, the correction mechanism could even cause prices to rise. Experts from the energy exchange ICE confirm this according to the “Financial Times”: According to this, traders would have to secure their gas transactions with an additional 33 billion dollars if the market correction mechanism were to be introduced.

Germany and a number of other EU countries, like the Commission, fear for security of supply if the EU sets gas prices permanently. If you want to lower the price, you have to change something about the fundamental market conditions, said Luxembourg Minister Claude Turmes, i.e. increase supply or reduce demand.

It was the ninth meeting of EU energy ministers since Russia invaded Ukraine. In order to somehow resolve the deadlocked dispute, there are to be two more meetings in December – one shortly before and one shortly after the summit of heads of state and government.

Irrespective of this, the EU Commission presented new target values ​​for gas storage facilities. By February 1st, the fill level in German gas storage facilities should not fall below 45 percent, by May 1st it should still be at least ten percent.

More: How the EU Commission is playing for time on the gas price cap

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