Europe

Gas reserves, subsidies and tax cuts: EU's tools to combat energy price spike

2 minute read

European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, July 14, 2021. REUTERS/Yves Herman

BRUSSELS, Oct 13 (Reuters) - The European Commission outlined measures on Wednesday the EU could use to combat surging energy prices, and said it would explore joint gas purchasing among countries as a way to cushion price spikes.

Record-high electricity and gas prices this year have curtailed industrial production and hiked consumers' heating bills, prompting 20 EU countries to draw up emergency measures, including energy tax cuts or subsidies for poorer households.

The EU's executive confirmed those national responses are allowed under the bloc's law, and mooted coordinated responses that would take longer to launch and address future price shocks.

The Commission will "explore the possible benefits" of member states jointly buying strategic reserves of gas, it said. Countries' participation in such a scheme would be voluntary. read more

Spain has led calls for the EU to launch joint gas purchasing, although other countries are wary of using lasting regulatory changes to tackle a short-term crisis. The Commission said gas prices are expected to stabilise at a lower level by April.

EU country leaders will discuss methods to tackle the issues at a summit on Oct. 21-22. Energy ministers from EU countries will hold an extraordinary meeting to discuss the price spike on Oct. 26.

"The only way to fully decouple gas from electricity is no longer to use it to generate power," EU energy policy chief Kadri Simson said. "This is the EU's long-term goal, to replace fossil fuels with renewables."

Gas plants generate roughly a quarter of EU electricity.

Some governments have said the price spike warrants changes to EU energy market rules, which they say are not fit for the EU's green transition, and curbs on financial speculation in Europe's carbon market.

The Commission said it would launch studies into both issues, but did not commit to immediate action.

Brussels is also investigating "all allegations of possible anti-competitive commercial conduct" by gas suppliers, following accusations from some EU countries that say Russia's Gazprom has withheld supply to push up European gas prices. read more

The EU is in the process of agreeing a major package of policies to fight climate change, and the Commission said a fast shift to clean energy is the most effective defence against swings in fossil fuel prices.

Brussels will issue guidance next year to speed up permitting processes for renewable energy projects, and it urged countries to spend EU COVID-19 recovery funds on clean energy.

Reporting by Kate Abnett; editing by Foo Yun Chee, John Chalmers, Elaine Hardcastle

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