The social impact of soaring energy prices worries the European Union. The Commission on Wednesday urged member states to reduce energy taxes by drawing on carbon market revenues. Europe also recommends supporting precarious households.
At a time when Moscow says it is ready to help the European Union to cushion the surge in energy prices, Brussels unveiled, Wednesday, October 13, an arsenal of temporary measures and outlines avenues for reform, but refuses to sacrifice its environmental ambitions.
As the price of gas has soared to all-time highs, driving electricity prices and threatening to derail the economic recovery, the European Commission has presented “tools” to ease the bills of the most vulnerable consumers.
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Brussels encourages states to lower heavy taxes on energy – including VAT – and to support households via vouchers or bill deferrals.
“Tap into carbon market revenues”
“It may seem like a heavy burden for states just recovering from the pandemic,” but they can tap into the revenue from the carbon market, where energy suppliers buy “rights to pollute,” told reporters Energy Commissioner Kadri Simson.
According to the Commission, the sharp rise in the price of CO2 has enabled States to rake in a total of 26.3 billion euros in revenue over the first nine months of 2021, or some 10 billion additional over a year, which they can therefore redistribute to the most disadvantaged.
However, these temporary measures must be “well targeted”, “easily adjustable” as soon as the situation improves, and “avoid interfering with the dynamics of the electricity market”, warns the Commission. Above all, they must not weaken the European Green Pact and support for renewables, insisted Kadri Simson.
Towards joint stocks between Member States?
Brussels was under pressure from certain states to present more ambitious lines of reform, intended to be examined at the European summit on 21-22 October.
Paris wants to revise the rules of the common electricity market, where the overall price is determined by the prices of fossil fuels. Madrid offers “group purchases” of gas and Athens a “transitional fund” absorbing price increases.
If, in the immediate future, stocks are deemed “tight” but “adequate to cover winter needs”, Brussels wants to strengthen solidarity between States, and will work on a “voluntary” system of joint supply of European stocks, embryo of ‘a “strategic reserve” claimed by Spain.
The European executive has proposed ways to strengthen gas reserves and verify that their use is “optimal”, while not all states have storage facilities and filling obligations vary a lot.
Atom versus renewables
The gas price crisis has also revived the debate on nuclear power, a low-carbon energy of which Paris praises the merits, but decried by several States, Germany in the lead, while Brussels must decide soon whether or not to include the civilian atom in its list of “green” investments.
Some, like the Hungarian sovereignist leader Viktor Orban, have also blamed the soaring prices on the European Green Pact and on the CO2 market.
A speech refuted by the Commission, worries that the crisis will jeopardize its ambitions of 55% reductions by 2030 in its carbon emissions, which include the gradual increase in fossil fuels.
“Only 1 / 5th of the increase in current prices can be attributed to the increase in the carbon market, the rest comes from supply shortages,” said Frans Timmermans, Vice-President of the Commission, calling for further accelerating the transition to renewable.