France and Spain call for EU action on energy crisis as prices soar

Two countries demand European co-ordinated response to protect businesses and the poor

France and Spain have called for a co-ordinated European response to the surge in global energy prices to protect the cost of living of its poorest residents and the competitiveness of businesses.

The two countries demanded changes to rules governing the EU’s energy markets, as they look to protect the bloc’s ambitious plans to become net zero by 2050.

Soaring prices for gas and electricity are forcing high utility bills up even further, hurting citizens who have already been hit hard by the pandemic.

“What we see is an unprecedented spike in energy prices,” said Spanish Finance Minister Nadia Calvino.

“This is not an issue that we can tackle at national level. We need a European co-ordinated response.”

Ms Calvino said her country had prepared a paper on the options.

One possibility proposed by Ms Calvino was the creation of a strategic European gas reserve, which would help the 450 million consumers living in the 27-member economic bloc negotiate lower prices than if the same purchases were made individually.

“We have learnt through the negotiation of the vaccine supply that we are stronger when we speak with one voice,” Ms Calvino said.

Spain also wants action to stop speculation on the market for carbon dioxide emissions permits, which also helped to drive up prices, she said.

French Finance Minister Bruno le Maire said he would propose better regulation of European gas stocks and breaking the link between the price of electricity and that of gas. He said an alternative option would be to tie it to the average cost of production in every EU country.

“The European energy market has one key advantage – it secures the supply of energy everywhere in Europe. But it also has one major downside – the alignment of electricity prices with gas prices,” Mr le Maire said.

He stressed this link was inefficient and created a “dead end” for Europe’s transition towards renewable energy sources. He also said politicians should explain to voters that the fight against climate change would entail a long-term increase in energy costs.

“For years, not months, we will have to face an increased level of prices, because there is a need for more electricity and there is a link between electricity and gas,” Mr le Maire said.

“There is also the need to invest more in renewable sources and maybe nuclear plants. This means a lot of money that could be required.”

Gas prices in the EU are at a record level after the the bloc’s main gas supplier, Russia, kept a tight lid on deliveries, signalling further price pressures on European consumers heading into the winter heating season.

Eurozone inflation hit a 13-year high in September, rising at its fastest pace since 2008 as energy costs rocketed.

Almost three million EU workers cannot afford to heat their homes, according to the European Trade Union Confederation. A study last month by ETUC, which represents 45 million members, showed that 15 per cent of the EU’s working poor – or 2.7 million people – lack enough money to turn on the heating.

If energy providers are forced to compete for the finite amount of gas, prices will continue to soar, with costs “inevitably” passed down to consumers.

As a result, European governments are scrambling to find ways to limit the costs as scant natural gas reserves expose the continent to price spikes and possible shortages if the winter is particularly cold.

Natural gas is cheaper in the US, for instance, which produces its own, while Europe must rely on imports.

Some utility providers are even preparing to switch to alternative energy sources to meet demand, including carbon-rich coal, as gas supply problems continue.

Energy analysts said the crisis was caused by tight supplies of natural gas used to generate electricity, high demand and higher costs for permits to emit carbon dioxide as part of Europe’s fight against climate change.

But EU Economy Commissioner Paolo Gentiloni said the sweeping package of measures designed to tackle global warming – the European Green Deal aimed at reducing greenhouse gas emissions 55 per cent by 2030 compared with 1990 levels – “is not the problem, but it is an important part of the solution”.

Mr Gentiloni said the commission “will shortly present a toolbox of measures to mitigate the impact” of the energy price surge.

He urged countries to take only temporary and targeted measures to help those hardest hit and said these should be consistent with Europe’s aim to become a non-carbon economy.

Updated: October 5th 2021, 8:44 AM