The war in the Middle East, with its impact on energy costs, represents a challenge for European competitiveness, wrote the President of the European Commission, Ursula von der Leyen, on Monday 16 March to the European leaders who will be meeting in Brussels on 19 and 20 March.
And it has already cost the EU an additional €6 billion.
The Middle East crisis is a regional conflict with serious geopolitical and geo-economic repercussions for Europe - in the areas of energy and finance, trade and transport, supply chains and population movements within and between countries in the region. And the impact “on our economies and industries is becoming ever more pronounced”, she warns.
Recalling that “this week’s European Council has long been planned as a pivotal moment for our competitiveness and security”, the current crisis only reinforces “that need and makes it even more urgent. It also brings into sharper focus our push for greater European independence as a way to better shield us from future external crises”.
The most urgent matter, from both a competitiveness and an independence perspective is energy, in particular oil and gas, writes the President.
Since 2021, the EU has made significant progress in diversifying its energy supply and increasing its renewable energy production capacity. But several sectors, notably transport, remain heavily dependent on fossil fuel imports.
While “the European Union’s physical security of supply of the European Union is assured, but the increase of fossil fuel prices is already weighing on our economy. Since the beginning of the conflict, Europe has already spent an additional €6 billion on fossil fuel imports. A prolonged disruption of the supply of oil and gas from the Gulf region could have a significant impact on our economy”.
In addition to actions already taken - such as releasing oil stocks - the President is therefore calling for increased energy production to be encouraged in countries capable of offsetting the disruption, and for all export restrictions to be avoided. She also calls for “ impacts affecting fertilizers”.
The President also stressed the urgent need to take action on the main factors that determine electricity prices.
Member States can also grant immediate electricity price relief to the most affected energy-intensive industries under the existing State Aid framework (CISAF).
As far as the cost of carbon is concerned, the Emissions Trading System (ETS) remains a tried and tested instrument for stimulating industrial transformation, says the President, in response to differing demands from the Member States. The ETS “is market-based, technology-neutral, and provides long-term investment certainty while rewarding first movers. Based on the ETS system, companies across Europe have made investment decisions for the coming decades. We must now ensure that it is also adapted to new realities”.
The Commission will soon be adopting the reference values for the ETS, taking account of the concerns expressed by the sector. It will also present a proposal to strengthen the Market Stability Reserve.
And “anticipating the establishment of the Industrial Decarbonisation Bank, the Commission will work on a fast-track bridging instrument, financed by ETS allowances, and with a particular focus on lower-income Member States”.
Link to the letter: https://aeur.eu/f/l7j (Original version in French by Solenn Paulic)