The energy ministers of fifteen Member States (Belgium, Bulgaria, Croatia, France, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain) sent a joint letter to the European Commissioner for Energy, Kadri Simson, on the evening of Tuesday 27 September, calling for a cap on the price of fossil gas.
“We (...) call on you to present us with a proposal in this direction to be discussed at the extraordinary Energy Council of 30 September, (see EUROPE 13020/16) followed by a legislative proposal as soon as possible”, the letter said.
The ministers state that this cap “should be applied to all wholesale natural gas transactions”.
In a non-paper presented to the Member States on 9 September, the European Commission had advocated for the introduction of a limited cap on Russian gas imports by pipeline (see EUROPE 13016/1). It considers that the introduction of a generalised cap could lead some gas importers, in particular liquefied natural gas (LNG) importers, to divert their supplies to Asian markets, thereby jeopardising the EU’s security of supply.
According to Georg Zachmann, energy and climate policy researcher at the Bruegel think tank, Germany’s absence from the list of signatories is partly explained by the fear that German companies will not be able to bid higher than other buyers because of the cap, while the country “has not nearly enough gas”.
For their part, the signatory countries believe that a cap on gas prices can however “be designed in such a way as to ensure security of supply and the free flow of gas within Europe”.
The letter further stresses that this is the only instrument that can help each Member State “to mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector”.
Bram Claeys, senior advisor to The Regulatory Assistance Project - an NGO specialising in the energy sector transition - does not share this view and has just published an assessment with colleagues of the various options available to support consumers in the face of the energy crisis.
His main criticism is that a cap “masks the signals sent by high prices and therefore makes it more difficult to take action to address the causes of high prices, mainly the fear of running out of gas this winter”.
He also agrees with the Commission’s concerns that this is a difficult measure to implement, given the international and competitive nature of the gas market.
“The idea seems to be to price European gas just a little higher than what Asian markets are paying in order to avoid a diversion of supplies, but Asian buyers would only have to bid a little higher”, he told EUROPE.
Mr Claeys therefore advocates for focusing instead on reducing gas consumption, “which won’t happen if you make gas cheaper, unless you combine the cap with measures forcing people to use less gas”.
While measures to reduce gas consumption are often seen as long-term (e.g. building insulation), it can also be done through short-term measures, he told EUROPE, mentioning information campaigns to encourage citizens to change certain behaviours and the organisation of auction or tender systems to encourage companies to reduce their energy consumption.
“The EU could also negotiate a lower price for gas currently transported by pipeline - mainly from Norway and Algeria - by ensuring that this lower price benefits end consumers”, Mr Claeys stressed. In his view, this option is not “a miracle solution”, but “is in any case more feasible”.
A preferable alternative, he says, is to keep the price of gas high, but to capture the excess profits of gas companies and electricity producers and redistribute them to low-income or vulnerable consumers and struggling businesses.
See the letter: https://aeur.eu/f/3at
See the Regulatory Assistance Project assessment: https://aeur.eu/f/3as (Original version in French by Damien Genicot)