Europe

EU to target high energy prices – The Baltic Times

RIGA – The EU on Wednesday will present a “toolbox” of measures to mitigate an energy crunch that threatens to send Europeans’ power bills soaring.

The European Commission has been under pressure to act on the looming crisis, even though individual EU governments are more directly responsible for their energy sources and taxation.

Energy prices have taken off this year as economies bounce back from the effects of the Covid pandemic.

Wholesale natural gas prices, the leading indicator for overall consumer and industrial energy prices, have more than tripled this year in Europe, with storage tanks perilously low ahead of winter. Oil and coal prices have also jumped.

Some EU officials accuse Russia, source of most of the imported gas into the bloc, of “blackmail” by limiting supplies to try to force Germany to activate the newly completed Nord Stream 2 pipeline across the Baltic, bypassing Ukraine.

Outgoing German Chancellor Angela Merkel, however, has questioned that, suggesting there had been insufficient long-term gas contracts from European countries.

The issue will headline an EU leaders’ summit next week.

But in a bid to first alleviate some of the pressure, Brussels is expected on Wednesday to urge member states to temporarily cut national taxes that heavily inflate the cost of energy to consumers and businesses.

The EU’s commissioner for industry, Thierry Breton, said in a French radio interview on Monday that “all (EU) countries will… benefit from this situation because there are a lot of taxes on energy”.

Brussels could also approve a provisional reduction in value-added tax and back initiatives such as “energy cheques” for the poorest households. A proposal for a US-style strategic gas reserve might also be raised.

It was less certain whether it would take up a suggestion from France — which gets most of its power from nuclear stations — to sever a price link between gas and electricity, or another from Spain for the EU to make joint gas purchases.

A focus on lightening taxes could, EU officials hope, divert public attention from the EU’s emissions trading system (ETS), a market mechanism in buying and selling carbon credits that some have blamed for the price hikes.

The commission vice president in charge of the EU’s green transition, Frans Timmermans, has said that only around 20 percent of energy costs felt by consumers come from the ETS.

Timmermans and commission President Ursula von der Leyen stress that the ETS is crucial for Europe to meet its target of becoming carbon neutral by 2050. They stress that renewable energy sources are cheaper than fossil fuels.

The EU executive is also wary of anything that could breach the bloc’s single market rules. Germany and the Netherlands argue against “extreme measures” being taken.

Analysts at the Bruegel think tank said that, for the short-term energy problem, the EU cannot do much to boost supply.

“The only thing Europe can quickly do to prevent a potentially difficult winter is to actively promote energy conservation in both the residential and industrial sectors,” said Bruegel senior fellows Simone Tagliapietra and Georg Zachmann in a post on the institution’s site.

For households, that would include “switching off lights, closing curtains, and taking shorter hot showers” while manufacturers could pare back production or consider temporary closures, they said.

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