Is the EU Energy Price Cap Becoming a Reality?

EU leaders met in Brussels on Thursday and Friday to discuss a range of issues facing member countries other than Russia escalated aggression towards Ukraine and the ongoing energy crisis was the central topic of discussion. The outcome has paved the way for the European Commission, the EU’s politically independent executive body, to start drafting proposals for a temporary energy price cap.

This European Council meeting was the official follow-up to the emergency meeting of EU Heads of State or Government, held in Prague on 7 October, following the first date of European Political Community on October 6th.

EU Commission President Ursula von der Leyen discussed the results of the European Council meeting in a press conference on Friday.

Here are their main conclusions:

The potential for an energy price cap

The focus of Thursday’s talks was the ongoing energy crisis, and the Council agreed on a range of possible actions, which were detailed in the meeting’s conclusions. The heads of state and government of the EU have invited the members of the Council and the Commission to do so urgently decide on concrete measures so that each country can assess the impact that agreed actions will have on each nation’s specific circumstances.

Suggested actions include a voluntary joint gas purchase in order to use the Union’s collective market weight. This was made voluntary in response to Hungary’s opposition to a mandatory approach.

The Council also tends towards a Upper limit for the gas price. This proposal goes hand in hand with a commitment to include a ‘cost-benefit analysis’ of the measure itself.

Nothing is finalized yet and it will take a lot more ‘talking’ – a popular EU pastime – before a decision is made. The breakthrough was the result of Germany’s regression from its previous position. So far, Berlin has been one of the strongest opponents of a price cap, but Germany bowed to pressure from other top politicians on Thursday. It will support temporary gas cost control while a new pricing system can be developed.

There are fears that by refusing to trade gas above a certain reference price, the EU will trigger shortages by inducing Russia to simply sell to Asian markets instead.

Several points in the meeting’s conclusions address these concerns by suggesting ways to mitigate the threat of shortages.

A measure would be accelerate and simplify approval processes to accelerate the expansion of renewable energies and the associated grids.

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There are also a proposal for energy solidarity measures in the event of gas supply disruptions at national, regional or EU level.

The easy decision to step up efforts to save energy was also listed as a possible action.

EU leaders delegated further talks to the EU Council for Transport, Telecommunications and Energy meeting next week.

Chancellor Olaf Scholz also suggested that an emergency summit of EU leaders will be needed next month. This meeting would give Germany and others the opportunity to veto the European Commission’s final proposal.

The Council reiterated its commitment further improvement of the European energy systems by focusing on renewable methods of energy production. This is intended to help the EU break away from its fossil fuel dependency on Russia.

Suggested tools for these improvements include increased energy efficiency, future-proof energy infrastructure and innovative renewable technologies.

President von der Leyen said of the proposal:

“We have a lot of work ahead of us now on energy, but the roadmap is very clear and it has been good to have this unwavering, broad support for the roadmap that we have put forward.”

The mood is generally hopeful, but compromise always means that no EU member state will be entirely satisfied with the outcome. However, EU leaders insist the best approach is a unified one.

Continued funding of the war in Ukraine and future reconstruction

President von der Leyen discussed EU plans to continue funding Ukraine’s war effort in the face of mounting Russian aggression and outlined an aid package to help Ukraine cover its budget in 2023. In May this year, the EU pledged €9 billion in aid to be disbursed to Ukraine over the course of 2022; so far the The EU contribution totals 19 billion euros.

Ukraine has requested €3-4 billion a month to raise resources for basic operations. President von der Leyen noted the importance of Ukraine having a predictable and stable income stream and committed to this 1.5 billion euros per month, totaling 18 billion over the course of 2023, funded by the European Union.

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The other 1.5 to 2.5 billion are to be contributed by the United States and other financial institutions.

Regarding the recent actions of Russia itself, the coinclusions from the session state:

“The European Council condemns in the strongest possible terms the recent indiscriminate Russian missile and drone attacks on civilians and civilian objects and infrastructure in Kyiv and across Ukraine. She also condemns Russia’s actions at Ukraine’s Zaporizhia nuclear power plant.”

President von der Leyen agreed with this mood at the press conference on Friday called Russia’s attacks on civilian infrastructure “horrific and premeditated”.

The discussion then shifted to the reality of the ongoing humanitarian crisis in Ukraine. The EU has confirmed another 175 million euros will be made available to cover humanitarian needs of over 11 million internally displaced people without access to water, electricity, heating and shelter.

Concluding on the topic of Ukraine, President von der Leyen discussed the medium and long-term goals of Ukraine’s reconstruction in the context of its candidate status for possible EU membership:

“The necessary massive investments should be geared to the reform requirements in order to really pave the way for EU membership now. As you know, Ukraine is a candidate country, so everything should focus on this common journey that we will undertake together.”

That International expert conference on reconstruction, reconstruction and modernization of Ukraine will take place next week in Berlin. The aim of this conference is to discuss the technical and financial challenges in the reconstruction of Ukraine. The keynote speech at the conference will be given by Ukrainian President Volodymyr Zelenskyy.

Strategic foreign relations with the looming threats from China and Iran

At Thursday’s meeting, the European Council emphatically condemned human rights abuses in Iran by the unacceptable use of force by the Iranian authorities against peaceful demonstrators.

The Council welcomed the measures adopted on October 17 in response to this aggression, including: a Travel ban and asset freeze for 11 people and four entities for her role in the death of Mahsa Amini and a ban on EU citizens and companies making funds available to these people and entities. The EU calls on the Iranian government to release all arrested peaceful protesters.

tensions with Iran have also arisen this week because of Iran’s delivery of drones to Russia, used in the last one Bombing of Kyiv.

The discussion on China took place on Friday morning and President von der Leyen outlined the conclusions in her press conference. That Concerns centered on the EU’s continued reliance on China for technology and raw materialsespecially given President Xi’s clear mission to establish dominance in East Asia.

President von der Leyen said about this dependence on China:

“We have to be very vigilant when it comes to dependencies and we have learned our lesson about the over-dependence on fossil fuels from Russia and how difficult but necessary it is to get rid of that dependency.”

The future priorities of the EU will be to strengthen its own capacities and to diversify the supply of raw materials from other reliable and trustworthy suppliers. To this end, the EU is working on free trade agreements and raw material partnerships with other countries.

The EU-ASEAN Commemorative Summit will take place on December 14, 2022. The European Council has now declared that the goals for this summit should go even further Deepening the European Union’s strategic partnership with Asiato emphasize a shared attachment to international law and internationally agreed norms and standardsand focus on common interests which connect the regions in a long-term partnership.

Next Steps

From the two-day meeting, European Council President Charles Michel said:

“This was a crucial European Council. Crucially, it has created a framework that is now clear and unreserved, along with a list of actions that now need to be fine-tuned so that, we hope, they can be implemented progressively so that they have what they want Impact on the three priorities: lowering prices, ensuring access to supply and further efforts to reduce demand. We are determined to achieve all three goals.”

Many of these suggestions will be further substantiated by the series of events planned for the coming weeks.

The meeting of EU energy ministers and the international expert conference in Berlin will both take place on October 25th. The EU-ASEAN summit is just over seven weeks away, but in the meantime an emergency summit of EU leaders is looming.

The adoption and implementation of the proposed measures will continue to be slow, as is typical for the EU, but seems to be going in the right direction, at least for the time being – provided Germany plays along.

Editor’s note: The opinions expressed here by columnists are their own and not those of — Featured Photo: President of the European Union Ursula von der Leyen


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