28th March 2024
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Spain’s proposals for energy buying reform rejected by EU

Spain’s attempts in the last few days to suggest a joint EU system for buying gas have been dismissed.

As one of the country’s that has been worst hit by rising fuel costs, Spain had been keen to address the escalating problem by jointly securing gas by auctioning contracts, essentially giving countries the option to buy fuel when prices are rising rapidly or when there is a threat to supplies.

In recent months gas prices globally have been soaring, due to increasing demand as countries rebound from the downturn caused by the pandemic, combined with a shrinking supply.

As a result, the price of gas and electricity has reached record highs in recent weeks, with increasing pressure being put on governments to address the issue and protect consumers and businesses.

Spain has been particularly affected by price increases, with the government recently stepping in to try to protect households from the hike in costs.

In the run up to a meeting with other EU countries this week, Spain had put forward proposals to address the escalating crisis, suggesting that an EU structure is established for a joint portfolio of contracts through the gas system operators in each of the member states for periods when prices are rising or supply is threatened.

Speaking about the proposals, Spain’s Minister for Energy, Sara Aagesen Muñoz, said that ‘we need to keep working on much more ambitious measures … our proposal is purchase contracts, options to buy that could be done in a centralised way by the European Union’.

However, the proposals have been dismissed during an extraordinary meeting of EU member states in Luxembourg this week. The 27 states were represented by transport and energy ministers, who had gathered to discuss the energy crisis.

It was agreed that a precautionary approach was to be adopted, thereby respecting current market rules in the energy sector, and avoiding any long-term damage to the industry.

Instead of the more extreme reform measures that Spain was proposing, a more targeted and temporary approach to dealing with the crisis was agreed, whereby support for vulnerable households and companies struggling with costs would be put in place by individual governments and expected to continue until next April.

The measures suggested include direct income support, state aid and tax reductions to directly support those in need.

Electricity worker.
Electricity worker. (Anton Dmitriev / Unsplash)

Spain, along with many other EU countries, has already announced support packages along these lines, but had highlighted that this was not enough and that more extreme measures were required to contain the crisis.

Muñoz was urging other member states to join together to deliver a ‘European response’ rather than the domestic measures proposed by Brussels.

Most other member states, however, have stated that they believe the current crisis is temporary and directly driven by the sudden increase in global demand as countries emerge from the pandemic.

A number of EU countries, including Germany, have jointly stated in an open letter that they are keen to avoid market intervention, saying that ‘transparent and competitive energy markets deliver efficiency and competitive prices to end-users … as the price spikes have global drivers, we should be very careful before interfering in the design of internal energy markets’.

Despite the setback to Spain’s attempts to introduce reform, it is continuing to put pressure on the EU, presenting a new document with suggested reforms that have previously been supported by France, Greece, Romania and the Czech Republic.

ALSO READ: Diplomatic offensive as Algeria-Morocco stand-off threatens Spain’s gas supplies

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