The European Union is in a rush to find ways to alleviate the energy cost pain for consumers and businesses, with energy ministers of member states set to meet later today to discuss options.
These, according to Reuters, include boosting the supply of carbon permits to reduce their price, state support for industrial energy consumers, and tax cuts. The reportedly discussed options suggest European leaders are making a rare move to prioritize energy affordability over emission reduction.
The option with greater availability of carbon permits is especially telling—the Commission originally planned to reduce the number of such permits made available to industrial energy consumers with a view to motivating them to spend more on reducing their emissions. Now, this has taken the back seat in favor of preventing a total industrial collapse amid soaring oil and gas prices.
The spike in natural gas prices has been especially harmful to the European Union, which imports close to two-thirds of its hydrocarbon energy overall. The bloc is particularly sensitive to gas prices, however, because of its newly developed overwhelming dependence on U.S. liquefied gas, which is mostly traded on the spot market, where prices are sensitive to supply shocks. With a fifth of global LNG production capacity offline in Qatar and the UAE amid the war with Iran, LNG prices have unsurprisingly soared—and so have European benchmark gas prices. These are up by 50% from pre-war levels.
Yet whatever those energy ministers discuss today, there is no one-size-fits-all solution. Member states have different financial means, so while some would be able to afford support to their industrial consumers of energy, others may be hard-pressed to do the same. There is also the matter of energy mixes. Members with less gas in the energy mix would hurt less than those more dependent on it.
By Irina Slav for Oilprice.com
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