LUXEMBOURG — Europe’s energy ministers are running out of ideas to protect citizens from surging energy prices as winter approaches.
But at a summit in Luxembourg on Thursday, they were clear on one thing: Demanding voters cut back on power use is not an option.
European gas prices soared above €100 per megawatt-hour on Wednesday for the first time since 2022, as last-minute panic-buying to fill European gas reserves added to supply pressures linked to the war in the Middle East.
But at the Thursday summit, EU energy ministers broadly acknowledged that both Brussels and national capitals had run out of ideas to contain price pressures.
“We’ve exhausted most of our short-term options,” said one senior European energy official, granted anonymity to offer a candid perspective. “What’s left is really crisis management.”
For the past year, government attempts to cushion price rises with renewables schemes, windfall taxes and costly fuel subsidies have ultimately failed to contain anxieties that have since boiled over into widespread protests across the continent.
“The EU and member states don’t have a magic wand to make the price increases go away,” Irish Energy Minister Darragh O’Brien, whose government holds the EU’s six-month rotating presidency, told reporters. “There’s a lot of measures that have been taken already in the short term. What today is about is actually seeing how we can move to more sustainable measures.”
But even crisis management is proving politically difficult. Despite calls by EU energy chief Dan Jørgensen earlier this year to encourage consumers and businesses to cut energy use, European ministers are reluctant to make such a move official policy.
“I don’t want to see that we will limit people,” said Mika Nykänen, the state secretary to Finland’s energy ministry. Instead, he called for policy designed to “change behavior” and reduce energy consumption less painfully. “Industry does it naturally. Normal households, normal families — they sometimes need encouragement,” he said. “For instance, subsidies to invest in the energy efficiency of houses, windows.”
Demand reduction “has an impact on industry, it has an impact on business, and in a difficult situation, it could be the way to do that. But it does not … solve the long-term,” Polish Secretary of State for Energy Wojciech Wrochna told reporters.
High prices “will regulate demand by itself,” Swedish Energy Minister Ebba Busch told reporters.
Fossil fuel subsidies
Such was the opposition to demand reduction measures on Thursday, Jørgensen — who was at the summit warning of a “difficult” winter of soaring fuel prices ahead — gave up even proposing it, focusing instead on subsidies. He reluctantly accepted that such subsidies could include fossil fuels as well as clean alternatives, but urged that they be “targeted and temporary.”
Since the war started, governments have paid €18 billion for tax relief on fossil fuel products, including a controversial move by Rome earlier this month to reduce the impact of gas prices on electricity costs.
European Commission President Ursula von der Leyen warned national leaders against this tendency, urging them at a summit this month to keep policies temporary and targeted to avoid inadvertently increasing fossil fuel demand and distorting the EU single market, according to two EU diplomats familiar with her comments.
That remains a point of contention among EU leaders, with some, including Greece, calling for greater fiscal space to increase energy subsidies while others warn of the dangers of subsidizing fossil fuels.
“Our concern is to make sure that we don’t create conditions where different member states go very far in different national decision-making,” said Lithuanian Energy Minister Lukas Savickas in a separate interview.
Jørgensen did not respond to POLITICO’s question at a subsequent press conference when asked whether new fiscal flexibilities were being considered.
Other ideas have gone by the wayside. Von der Leyen rejected calls by countries to establish an EU-wide tax on windfall profits of oil and gas companies at this month’s summit, the diplomats cited above said even as European oil companies like Shell, TotalEnergies and Repsol rake in their biggest profits since 2022.
Member countries also questioned the value of a Commission proposal to coordinate the purchase of energy supplies. Such a scheme would work in theory but be hard to implement for “big players” with established supply chains, Wrochna said.
Neither has the EU’s commitment to hastening the release of strategic crude oil and diesel reserves earlier this month — in response to what EU officials described as U.S. “blackmail” — done much to ease fuel costs.
Even so, the EU’s commitment will now include over 40 million barrels on top of the 10 million pledged by Paris, France’s economy minister Roland Lescure told reporters on Thursday.
A parallel push to delay methane monitoring requirements — a plank of the EU’s 2024 Green Deal that industry argued was poorly designed and would disrupt supplies — also had no impact on prices.
Slow pay-off
To be sure, measures designed to lower electricity prices and encourage consumers to switch away from imported fossil fuels are starting to work, with soaring sales of heat pumps and electric vehicles in Europe this year. “There’s no silver bullet, but when you add all of these things up, it can actually matter,” said Jørgensen.
But even longer-term efforts to encourage the switch to cleaner energy are facing backlash as countries resist ceding power to Brussels.
One example is a Commission proposal to make electricity bills more affordable and speed up electrification, including by ensuring electricity is not taxed more heavily than natural gas. Member countries pushed back against the proposal’s taxation provisions on Thursday, arguing that Brussels is overstepping EU treaties requiring that tax changes be approved unanimously, risking higher costs for households and industry.
Busch, the Swedish energy minister, said the proposal’s taxation provisions went too far, warning it would face “a lot of pushback” from countries concerned about EU interference in national tax policy.
Germany and Poland also raised concerns about the proposal’s potential impact on industry and national tax systems, while Italy warned that changing tax rates could make energy more expensive rather than encourage electrification.
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