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BRUSSELS — Ahead of their first summit since war erupted in Iran, the European Union’s leaders agree on one thing: They need to take urgent action to stop energy prices from spiraling out of control.
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But governments are split on how to deal with the problem — and whose job it is, anyway.
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Some countries are demanding the European Commission take action to shield their citizens and companies from soaring fuel prices, arguing for far-reaching interventions in the EU’s environmental policy and energy markets to achieve short-term cost cuts.
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Others are adamant that the EU must preserve its existing rulebook and focus on long-term measures to reduce the bloc’s dependence on expensive fossil fuels, insisting that immediate relief measures are the responsibility of national capitals.
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The debate is expected to dominate the leaders’ meeting in Brussels on Thursday, with the side that wins the argument likely to shape the EU’s energy future for years to come.
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“The military escalation in the Middle East is causing global instability,” European Council President António Costa wrote in his invitation letter to leaders. “Together, we must identify the instruments we need to mobilise to ensure a timely, coordinated and effective response that protects our citizens and our companies.”
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There’s little the Europeans can do — or are willing to do — to tackle the main reason why gas prices on the continent are up 50 percent: Tehran’s blockage of the Persian Gulf, which was prompted by the United States and Israel bombing Iran since late February.
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In general, the war has seen EU governments agree that accelerating the switch to clean, homegrown energy is the obvious solution to high import prices, at least in the long term.
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But the battle at Thursday’s meeting is over whether to give the Commission marching orders to work on fixes that can rapidly bring down prices for households and industry.
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“The agreement is that the measures in terms of the energy transition — decarbonization, clean homegrown energy — is the right path to continue,” said a senior EU official, who was granted anonymity to disclose details about the summit preparations.
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But “leaders want to see concrete measures to reduce the prices also in the shorter term,” the official added. “I think here there’s no secret that there are different positions on how this should be tackled.”
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Short term vs. long term
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The EU executive, for its part, has some ideas. In a letter to leaders on Monday, Commission President Ursula von der Leyen largely passed the buck to national governments, suggesting they make use of existing EU rules to unleash subsidies and cut electricity taxes.
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Her proposals for EU-level measures tend toward longer-term solutions, promising legislative action for the efficient use of power grids, financial aid for energy-intensive industries, and steps to prevent the bloc’s carbon price from spiking.
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For countries preferring to focus on the longer term, that’s the right approach.
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“Some of the initiatives being taken on the European level … will help for the medium and longer term to speed up the energy transition, which is the only real solution to this,” Dutch Climate Minister Stientje van Veldhoven said in an interview. “But for shorter-term measures, it’s more up to the national [governments] to assess what’s most appropriate.”
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Governments in the short-term interventionist camp, though, are skeptical that will be enough.
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Poland’s Deputy Climate Minister Krzysztof Bolesta said while the letter contained some ideas that “piqued our interest,” the suggestion that governments could spend more on subsidies while slashing energy taxes was difficult to stomach.
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“If someone tells me, OK, you can reduce your taxes — and in Europe, many countries are in a situation where there’s extensive spending on defense and there’s very limited fiscal space — this is a really difficult proposal to handle,” he said on Tuesday.
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Poland is among the countries asking the Commission to rein in the bloc’s carbon price to bring down energy bills. The Emissions Trading System (ETS), which requires factories and power plants to pay for their planet-warming pollution, accounts for around 11 percent of the average European energy bill, far less than levies or the actual cost of energy.
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Polish Prime Minister Donald Tusk and nine other leaders on Wednesday wrote to von der Leyen demanding she quickly reform the ETS with a view to reducing its impact on power prices. Meanwhile, Italy’s Prime Minister Giorgia Meloni will arrive at Thursday’s summit insisting the EU suspend the ETS entirely.
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But a counter-coalition has already formed, with eight other countries warning that substantial changes to the landmark climate policy would undermine the energy transition and therefore the EU’s efforts to wean itself off fossil fuel imports.
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Vibe shift
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In the ETS debate, the Commission’s vague promises may aim to allow both sides to claim victory. But there are signs the interventionist camp is losing ground.
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Four subsequent drafts of the summit conclusions obtained by POLITICO show the text on energy evolving. While all iterations call for short-term proposals to reduce prices, the section on long-term measures has been strengthened since March, and now insists that accelerating the energy transition “is essential to reduce dependence on volatile fossil fuel markets.”
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Two other calls for major changes appear to have fizzled out already.
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Austria and a handful of other countries had advocated a reform of the EU’s electricity market design, under which expensive fossil fuels effectively set the wider electricity price.
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But at an EU ambassadors’ meeting Friday, Vienna’s pitch landed with a thud, two officials told POLITICO. Earlier, seven countries had warned Brussels not to meddle with the current design, as doing so could undermine investment in green energy.
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Another idea, floated by von der Leyen herself, was to cap the gas price. But the suggestion drew swift pushback from industry and several countries, in particular Germany.
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In Monday’s letter, von der Leyen struck a more cautious tone, merely pointing out that some governments had made use of price caps in past crises.
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“I don’t think that it is very likely that we would see any real long-term structural changes agreed at this point,” said one senior national energy official, granted anonymity to disclose details of internal discussions.
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On both the ETS and power market design, “the blocking group of [member states] is actually too big to move on these two topics,” the official added. “Small adaptations are, on the other hand, already on the table.”
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Gerardo Fortuna and Bartosz Brzeziński contributed reporting.
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