24th April 2024
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EU fails to agree ‘joke’ gas price cap amid deep divisions

EU energy ministers failed on Thursday to agree a cap on gas prices to mitigate the energy crisis in Europe, amid deep divisions over an initial proposal slammed by many, including Spain, as a ‘joke’.

The ministers will now meet in the first half of December to try to bridge differences

On Wednesday, the Spanish government had lambasted the European Commission’s proposed price cap on wholesale natural gas, set so high that critics questioned if it would ever be used.

Spanish ecological transition minister Teresa Ribera had called the commission’s proposal a ‘joke’, saying it would cause steeper price hikes and hamper efforts to tame decades-high inflation.

Spain could stop supporting other proposals on matters important to the commission if another ‘serious’ text is not forthcoming, Ribera added. The Police energy minister had also called the EU’s proposal a ‘joke’.

The EU executive on Tuesday unveiled a gas ‘safety ceiling’ of €275 per megawatt hour as the bloc grapples with high energy prices spurred by the Russian war in Ukraine and supply cuts.

But it comes with so many conditions attached that it would not even have been activated back in August, when the gas price briefly soared above €300, alarming Europe used to historic prices around 10% of that.

The cap proposal would only be triggered if the €275 limit was breached continuously for at least two weeks, and then only if the price for liquified natural gas (LNG) rose above €58 for 10 days within that same two-week period.

The price of wholesale gas in Europe on Thursday was around 124 euros, according to the main TTF benchmark.

At least 15 EU countries — more than half the bloc — want some form of workable ceiling on wholesale gas prices to tackle a supply crisis forced by the war in Ukraine.

While the European Union hasn’t banned Russian gas, the Kremlin has been turning off the taps in retaliation for sanctions imposed by Brussels in the wake of Moscow’s invasion.

Before the war, Russian gas supplies accounted for more than 40% of all imported gas into the European Union, with export powerhouse Germany particularly needy. That has now dropped to less than 10%.

But alternative sources — such as LNG shipped from the United States and the Gulf — cannot make up the shortfall, and Europe faces a pricey heating bill for winter.

EU energy commissioner Kadri Simson acknowledged the divisions over the price cap as she went into the meeting.

She noted that the ministers have ‘a right to calibrate the different parameters’ if they wished — something that may happen in time for their next meeting, likely to be called for 13 December.

The price cap plan, if adopted, would start in January. It would run alongside a voluntary initiative for EU member states to cut natural gas use by 15% over the northern hemisphere winter.

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