Faced with an “astronomic” rise in energy prices, European Union ministers will meet on Friday to discuss emergency measures to get their nations through the cold months ahead without additional social and economic upheavals.
“We are facing an extraordinary situation, because Russia is an unreliable supplier and is manipulating our energy markets,” European Commission President Ursula von der Leyen said Wednesday, outlining the commission’s plan. “Our unity and our solidarity will ensure that we will prevail.”But for all the talk of solidarity, the E.U. remains divided on the details, with some countries expressing skepticism about windfall taxes and others worried about the idea of a gas price cap.
In the more than six months since Russia launched its full-scale invasion, the E.U. has been trying to weaken Russia’s energy leverage — with mixed results.Russian pipeline gas now makes up 9 percent of E.U. gas imports, von der Leyen said Wednesday, not the 40 percent it was at the beginning of the war. The E.U. last weekto get gas stores to 80 percent well before the weather turns in November. As Europe’s reliance on Russian fossil fuels is waning, E.U. officials say, Putin is losing his grip.
Von der Leyen on Wednesday outlined plans for what she called a cap on revenue of companies producing electricity at relatively low costs but selling it for high prices allowed under European market rules.Wholesale electricity price have been soaring because they are currently tied to the cost of natural gas, which has been driven up exponentially by the Russian invasion of Ukraine.
The plan is bold but it also carries significant risk. The underlying problem in Europe is demand for energy is far outstripping supply. Addressing that problem without substantially reducing demand or bringing more energy into Europe threatens to create market distortions that ultimately could exacerbate the shortages. The windfall tax, for example, could discourage companies from making new investments in desperately needed energy infrastructure.
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