The EU is on course to impose historic interventions in the energy market to rein in soaring prices, including considering a levy on excess profits and gas price caps, according to a document obtained by POLITICO’s Brussels Playbook.
Experts at the European Commission, in national capitals and in embassies have been working around the clock over the weekend to speed up plans for an emergency intervention to protect households and companies — with many leaders warning of massive social unrest if prices are not brought under control.
In a document dated September 4 and obtained by POLITICO, the Czech presidency of the Council of the EU warned that Russia’s invasion of Ukraine, Moscow’s continued energy supply cuts and its recent “full and indefinite interruption” of the Nord Stream pipeline “are feeding rising inflation, and have severe impacts on all businesses and consumers.”
The Nord Stream news sent the price of gas on the benchmark Dutch TTF hub up 23 percent on Monday morning to €265 per megawatt hour.
In response, the presidency set the ball rolling by testing the appetite among the bloc’s 27 nations for measures ranging from price caps to market controls, asking capitals to declare which measures they are prepared to back at a meeting of the EU’s energy ministers this Friday.
The developments come after leaders from the parties in Germany’s ruling coalition on Sunday finally agreed to back the European Commission’s proposed electricity price levy for “inframarginal” plants — that is power generators not using natural gas. Because of the way the EU’s power market functions, such non-gas producers have been making huge windfall profits because the price of power is set by the most expensive input — natural gas.
The Czech presidency has compiled a list of proposals from across the bloc, to be considered ahead of Friday’s Energy Council.
Some capitals want price caps on gas from “specific jurisdictions” — meaning Russia, which has weaponized its energy exports. One idea being considered is a price limit at which companies can buy Russian gas, similar to the oil price cap measures agreed last week by the G7, in an effort to limit the Kremlin’s ability to finance its war in Ukraine.
Options to decouple electricity and gas prices are also on the table — but significant disagreements remain among EU countries on whether and how to implement such a sensitive intervention.
Other market measures being considered include providing immediate credit line support for companies experiencing very high margin calls, modifying the trading rules on energy exchanges or temporarily suspending European power derivatives markets, among others.
Central European governments want the EU to release additional greenhouse gas emission allowances from the Emissions Trading System if the price rises above a certain threshold — a proposal the European Commission strongly opposes.
Commission President Ursula von der Leyen is seeking to split the proposals into a package of immediate interventions and longer-term reforms. Brussels will postpone some of those wider-ranging ideas that leaders are pushing for, but that countries cannot agree on quickly (such as a Spanish idea to implement a gas subsidy or the Central European call to limit emission prices) to a later date without having to give a definitive no.
The Czech presidency wants countries to endorse a set of proposals — including the electricity price cap — at Friday’s Energy Council, tasking the Commission with developing legislation based on Article 122 of the Treaty on Functioning of the EU, which allows countries to agree emergency measures without the need to involve the European Parliament, diplomats said.
Leaders around the bloc, as well as European Council President Charles Michel, have been calling on the EU executive to act, as consumers and businesses struggle with of a cost of living crisis.
According to officials, the ultimate legislation is likely to be unveiled at the same time as von der Leyen delivers her annual State of the European Union speech on September 14.
This article has been updated with the latest gas price.
