Energy Crunch fuels calls to rethink EU green shift design

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

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

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

Soaring costs for electricity, natural gas and carbon permits threaten to inflict double-digit increases on consumers’ electricity bills, prompting EU member states to use measures unorthodox to mitigate the impact. Greece has pledged to subsidize electricity bills and suggested creating a carbon market fund to protect against rising prices. Spain wants to impose an exceptional tax on public services and has proposed a central platform for natural gas purchases.

The debate over immediate actions to deal with the crisis comes as EU lawmakers begin negotiations on the exact steps to reach the region’s new binding target of reducing greenhouse gases by at least 55% of by 2030 from 1990 levels. In a package of bills known as ‘Fit for 55’, the European Commission has proposed measures ranging from pricing emissions from heating and transport fuels to ban on new combustion engine cars from 2035.

Discussions on the package, which also includes a 72 billion euros ($ 84 billion) fund to help the most vulnerable households, micro-businesses and transport users, will last around two years. Laws require the support of the EU Parliament and EU Council member states to be approved, with each institution empowered to propose changes.

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

What Bloomberg Intelligence says

Low gas stocks in Europe, declining pipeline imports and strong Asian demand leading to liquefied natural gas (LNG) cargo diversions provide a constructive backdrop for regional wholesale gas prices in the heating season. . Declining national production, competitive global LNG markets and increasing gas consumption for electricity production in a context of volatile carbon prices could maintain tight balances in 2022 as a post recovery. -pandemic takes place.

– Patricio Alvarez, BI analyst

Read the full report here.

Poland wants a two-pronged approach from the EU: offering flexibility to Member States to introduce immediate measures to protect consumers and ensuring long-term mechanisms to reduce energy poverty in the region.

He also called for urgent measures to limit the influence of financial investors in the EU’s emissions trading system and urged Brussels to be “confident” in the face of unfair market practices. gas.

Gas and electricity prices are breaking records as European economies rebound from the Covid-19 pandemic. The surge in demand coincides with limited gas imports from Norway and Russia, with some countries accusing Moscow of manipulating supplies to increase pressure on the EU and gain approval for the controversial Nord Stream 2 pipeline.

“We cannot allow any producer to abuse their dominant position and treat the gas supply as a political tool,” the Polish government said. ‘Leaving existing pipelines and storage capacity largely unused amid a supply shortage is a clear sign of market manipulation and a taste of what the EU can expect in the future. to come up. “

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