The European Commission is preparing a ‘toolbox’ of measures for EU governments to deal with the current soaring energy prices without harming the European single market. EURACTIV got its hands on the draft proposal.
EU heads of state will discuss the toolbox proposed by the Commission at a summit meeting on 21-22 October.
Here’s what he’ll understand – and what he probably won’t include.
“Targeted support” for low-income households
Faced with rising energy costs, the governments of Spain, France, Italy and Greece have announced measures to help low-income households pay their energy bills.
Emergency income support is considered uncontroversial by the European Commission, provided it is temporary and “targeted” on the poor.
The Commission document states that lump sum payments are generally preferable because they encourage households to reduce their energy consumption.
In addition, EU countries can introduce safeguards to ensure that no one is disconnected from the energy grid, said EU Energy Commissioner Kadri Simson.
Deferred payments of electricity bills are also listed in the draft toolkit as an opportunity to ease the burden on low-income households.
Tax breaks on electricity
Taxes and levies represent on average 41% of household electricity bills and 30 to 34% for industry, according to the disclosed document.
Suspension measures, like those put in place in Spain, are viewed favorably by Brussels, provided they are limited in time and targeted at the poor.
“Providing targeted support to consumers, direct payments to those most exposed to the risk of energy poverty, reducing energy taxes, transferring charges to general taxation, are all measures that can be taken very quickly, by under EU rules, “Commissioner Simson said in a speech to the European Parliament on Wednesday (October 6th).
State aid for small businesses
The European Commission will also look favorably on direct government assistance to the small businesses most affected by rising energy prices.
“Businesses and in particular SMEs can benefit from state aid or by facilitating longer-term power purchase agreements,” said Simson.
According to the disclosed proposal, such measures are acceptable as long as they do not distort competition and lead to fragmentation of the EU’s internal energy market.
Governments should also refrain from interfering with the EU’s carbon market, the EU’s Emissions Trading System (ETS), he said.
Market surveillance and enforcement
To better anticipate emerging trends in the energy markets, the Commission proposes to strengthen the monitoring mechanisms, involving the national competition authorities and the European Agency for the Cooperation of Energy Regulators (ACER).
To monitor the situation in the 27 EU Member States, Brussels will also propose the creation of a “Coordination Group on Energy Poverty and Vulnerable Consumers”.
“We have to make sure that markets operate in a fair and transparent manner. Competition authorities and national regulators with ACER have a role to play in monitoring the market and preventing uncompetitive practices, ”said Simson.
The EU executive warns that it will not hesitate to crack down on possible violations of EU competition rules.
Electricity market reform
Pressed by Spain and France, the European Commission has declared itself ready to examine a revision of the rules of the electricity market in order to decouple the price of electricity from the cost of gas.
Although gas only accounts for a fifth of electricity production in Europe, gas-fired power plants have become price determinants in the electricity market because they can be started in the short term to meet peak demand. demand.
“If the electricity prices are high, it is because of the high gas prices, and we have to look at the possibility of decoupling within the market because we have much cheaper energy like renewables,” said Commission President Ursula von der Leyen during a visit to Estonia on 5 October.
Yet the Commission seems reluctant to reopen the EU electricity market directives, which were revised almost three years ago. Rather, he proposes to launch an initiative to deepen cross-border regional cooperation in retail energy markets and to launch a study on the formation of electricity prices.
“There are no taboos but we must not forget that the EU’s energy system is the most reliable in the world,” Simson told EU lawmakers, adding that “there is no model alternative market “which would help lower prices in the current situation.
“We are ready to launch a study with ACER on the current design of the electricity market and its ability to ensure a safe and cost-effective transition to a net zero energy system,” said Simson.
EU member states are also encouraged to promote consumer rights, making it easier to switch providers in search of the best deal. And in the event of an energy company going bankrupt, EU governments will be asked to nominate a supplier of last resort.
Promote renewable energies and energy efficiency
Renewable electricity is currently the cheapest on the market, a point that the European Commission has repeatedly said since the start of the crisis.
EU countries are therefore urged to speed up authorization procedures for new wind and solar farms, with a new “guidance document” due out in 2022 to help member states identify best practices .
The Commission will also present a proposal to improve the energy efficiency of the European building stock, thereby helping to reduce the energy bills of building occupants.
Gas market reform
The European Commission will use a long-planned reform of EU gas market rules, expected in December, to examine “problems with storage and security of supply,” said Simson.
According to the leaked proposal, the next package will seek to empower consumers to choose renewable, low-carbon gases over fossil gases in order to shift the supply of imports from third countries to more decentralized, country-based production. the EU.
The Commission is also considering a new regulation establishing new regional cross-border gas risk groups focused on low-storage regions. The groups would analyze the risks for the next 5 years and give advice on risk management.
But the big idea – suggested by Spain – is a proposal to buy gas jointly as a means of building up stocks. This would allow the countries concerned to pool their forces and create strategic reserves which could be released in the event of an emergency. Participation in the scheme would be voluntary and designed so as not to distort competition in the energy market.
Commissioner Simson, however, expressed doubts about the idea, telling Parliament that “the complexity and practical obstacles have always outweighed the benefits” of joint public procurement.
On finance, the document says the Commission will present a proposal “complementary” to the EU’s green finance taxonomy which will focus on transitional technologies such as gas, without further details. A Commission proposal on taxonomy has been in the works for several months, but it is not known when it will be published or what it will contain.
Use of ETS revenues
Rising energy prices have pushed up the price of CO2 allowances on the European carbon market, the Emissions Trading System (ETS).
Since most of the ETS income goes back to the national state coffers, these can be used for direct support to households and SMEs, suggests the Commission.
“The immediate priority should be to mitigate social impacts and protect vulnerable households, ensuring that energy poverty does not worsen. Higher-than-expected ETS incomes provide space to do this, ”Simson told the European Parliament.
In the first nine months of the year, EU countries received an additional € 10.8 billion in ETS revenue compared to the same period in 2020, she noted.
In the longer term, the Commission has proposed a Social Climate Fund to protect citizens from rising carbon prices. “We will present by the end of the year a recommendation to provide the necessary policy guidance to ensure that Member States adequately address the social and employment consequences of the clean energy transition,” said Simson.
However, the Commission excludes any reform of the ETS to deal with the current crisis.
“Playing with the emissions trading system” would only have a “very small” impact on the current energy price crisis, EU climate chief Frans Timmermans said on Wednesday October 6.
[Edited by Zoran Radosavljevic]