Until a few weeks ago, possible responses to a new energy price crisis were not on the agenda for the summit of European leaders in Brussels on Thursday 19 March. They are now an integral part of a discussion on European competitiveness, in the wake of the informal Alden Biesen summit in mid-February (see EUROPE 13807/2).
As the President of the European Commission, Ursula von der Leyen, has pointed out on several occasions, since the Middle East conflict began on 28 February, Europe has already spent “an additional €6 billion on fossil fuel imports - a direct reminder of the price we are paying for our dependence”.
The latest draft conclusions, which will be officially adopted at the end of the European summit, as obtained by Agence Europe, include elements from a letter on competitiveness presented by the President of the Commission on Monday 16 March (see EUROPE 13829/3).
The latter presents a ‘toolbox’ for dealing with structurally high energy prices, but also with price shocks in the very short term, with possible crisis measures if the situation on the energy markets were to get even more bogged down.
On Thursday, a strike against critical Iranian energy infrastructure sent oil prices soaring, topping $108 a barrel for Brent crude, the international benchmark. On 27 February, it was around $72.
Some of the measures proposed include the possible introduction of a new cap on gas prices, similar to a decision taken to tackle the 2022 price crisis. According to the Commission, national governments can also take action on taxes and levies on electricity bills, which is unlikely to arouse much enthusiasm in a context of strained public finances.
Revision of the Emissions Trading System. EU leaders are expected to call on the Commission to present a revision to the Emissions Trading System (ETS), which has been criticised by European heavy industry, “by July 2026 at the latest”.
A series of proposals put forward by Ursula von der Leyen, such as strengthening the intervention power of the carbon quota reserve or taking industry’s concerns into account when determining the quantity of free carbon quotas still in circulation, have met with a cautious but favourable response from a number of Member States (see EUROPE 13830/3).
However, there are two opposing camps on the subject, with positions that are “increasingly clear-cut”, as one European diplomat points out.
Denmark, Spain, Finland, Luxembourg, the Netherlands, Portugal, Slovenia and Sweden do not want to change the current mechanism, while Austria, Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Italy, Poland, Romania and Slovakia are calling for an in-depth review “by the end of May at the latest”.
In a letter sent on Wednesday 18 March, the latter took the view that “the pathway planned by the Emissions Trading System up to 2034 is too steep and overly ambitious”. They also called for the phasing out of free allowances from 2028 to “avoid placing an excessive burden on the industry during this transition period”.
In response to a question from Agence Europe, Frederik Persson, Director of BusinessEurope, said that it was indeed necessary to modify what is known as the “linear reduction factor [...], in order to avoid an endgame to the Emissions Trading System (ETS) by 2040” and “to ensure a responsible phase out of free allowances”.
In addition, some Member States, such as Poland and Hungary, would like to see a further postponement of ETS 2 (extension to the transport and buildings sectors), which is due to come into force in 2028, according to a recent revision of European climate law, published this Wednesday in the Official Journal of the EU (https://aeur.eu/f/l8x ).
Despite the criticism of ETS1 and ETS2, the European Commissioner for Climate Change, Wopke Hoekstra, reiterated several times at the ‘Environment’ Council on Tuesday 17 March that there was “truly substantial support” for the ETS from industry and EU countries. But it was also recognised that “even the best tool can always be improved”.
Link to the latest draft conclusions: https://aeur.eu/f/l8a (Original version in French by Pauline Denys with the editorial staff)