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6th Jul 2022

Environment ministers continue dogfight on energy price hike

  • Energy commissioner Kadri Simson signalled support for the current single market, resisting pressure for fundamental market reform (Photo: EC - Audiovisual Service)
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"We have different views and different opinions" Jernej Vrtovec, the Slovenian minister for infrastructure, said at the end of an emergency EU Council meeting on the current spike in energy prices, on Tuesday (26 October) in Luxembourg.

"The price-hikes jeopardise the integrity of the European energy market," he added.

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Following the gridlocked summit of EU leaders on the issue last week, environment ministers again sought common ground amid conflicting interests.

France and Spain doubled down on calls for fundamental market reform, while a German-led coalition of nine member states warned not to overreact.

Hungary and Poland continued their resistance against green policies and again added their voice to a growing chorus of countries wanting nuclear energy to be labelled a green investment in the EU taxonomy.

Dutch environment minister Stef Blok also voiced support for the commission to "take nuclear energy into consideration for the taxonomy".

Amid the sparring member states, the European Commission resisted pressure for rapid reform, and referred national capitals to the so-called 'toolbox' of national measures - tax deductions and subsidies - they can take in accordance with EU law, while the commission works on more definitive long-term solutions that will be presented at the next energy council on 6 December.

Nineteen member states have already implemented these measures, but not all are convinced they are sufficient.

"Our preference is clear," said Sara Aagesen Munoz, Spanish energy minister, "we want a joint European response. We are talking about the single market. Therefore we need common solutions."

Single market?

Spain, as well as France, want EU countries to buy wholesale energy together, instead of leaving it up to market suppliers.

In addition, they want the EU to decouple electricity prices from gas prices.

"This would give the government much more room to manoeuvre in deciding energy prices," one EU diplomat, who did not wish to be named, told EUobserver. "But it would also challenge the level playing field created by the single market."

The wholesale electricity price in the EU is determined by marginal pricing, meaning all suppliers - including cheaper wind or solar - receive the same highest price, which currently is gas.

Proponents of this system, such as the Netherlands and Germany, say it stabilises market prices, providing more security for investors.

But in France, gas prices are driving up electricity prices, even as cheaper nuclear power provides 70 percent of electricity.

"France wants strategic autonomy, and to use state support to create an unfair advantage against other EU states" the EU diplomat explained to EUobserver - something they cannot do within the current single market system.

"Last year, gas prices were negative. With decoupled prices, that would have meant cheaper production for Germany at the expense of France," the diplomat said.

The social-democratic government of Spain also supports the decoupling of the gas price, and wants all EU member states to buy gas together. Both interventions would increase government price-control at the expense of the current single market-based system.

But EU environment commissioner Kadri Simson told press "it is not clear how such a system would work, and if it would improve the current system we have," and added that it would also "pose a risk to competitiveness and stability."

Member states will continue the debate on spiking energy prices until the end of the year.

Simson meanwhile promised that the commission will propose a possible delegated act - an amendment - "that addresses nuclear and gas" as possible options to include in the EU taxonomy.

She also said the European Securities and Markets Authority (ESMA) will look into possible acts of market manipulation.

The first preliminary findings will be presented on 15 November.

Moldova crisis

Meanwhile, the EU talks took place amid fresh accusations that Russia was abusing its market power for political purposes.

It has urged Moldova's new, pro-EU government to dilute its free-trade deal with Europe and delay implementation of EU energy market-liberalisation laws in return for more gas after slashing supplies earlier this year, according to the Financial Times newspaper, citing sources familiar with the Chișinău-Moscow talks.

But for its part, Moldova, on Tuesday, bought its first trial shipment of 1 million cubic metres of gas from Poland via Ukraine as well as a trial shipment from Romania in a bid to break Russia's stranglehold on its supplies.

"Independent from our business activities, by supplying gas to Moldova, we are also showing our energy solidarity," Paweł Majewski, the chief executive of Polish gas distributor PGNiG, said.

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