Brussels has outlined plans for caps on wholesale fuel costs to deal with a widening vitality disaster and curb inflation because the Kremlin seeks to ramp up stress on western Europe.
In a doc seen by the Financial Times on Monday, the European Commission’s vitality company recommends member states implement “emergency wholesale price cap” measures on fuel provides and units out two choices for doing so.
One includes placing a restrict on what may be paid for fuel imported from Russia. A second would introduce a capping system that may differ from nation to nation relying on their vitality combine.
The measures are a part of a broader plan to melt the blow of hovering fuel and electrical energy costs as a result of Vladimir Putin’s invasion of Ukraine. Co-ordinated steps, together with a system designed to funnel artificially inflated income generated by some electrical energy producers to customers, shall be mentioned on Friday by EU vitality ministers.
The proposals have been put ahead the day that Russia warned fuel provides by means of the important thing Nord Stream 1 pipeline to Europe could be halted until the west lifted its financial sanctions.
“Putin is using energy as a weapon by cutting supply and manipulating our energy markets,” fee president Ursula von der Leyen tweeted. “He will fail. Europe will prevail.”
She added that her plan would additionally embody methods to cut back electrical energy demand, assist weak customers and assist electrical energy producers experiencing liquidity difficulties. The proposals have but to be accredited by the complete school of commissioners.
Wholesale electrical energy costs have skyrocketed as a result of they’re linked to the worth of fuel, whether or not or not the electrical energy is produced with fuel or different means. Gas costs are round 10 occasions larger than a 12 months in the past.
Sweden and Finland sounded the alarm over the weekend by introducing measures to bail out energy producers and merchants going through larger collateral calls for from banks as a result of unstable electrical energy costs.
A worth cap on Russian fuel would restrict Moscow’s earnings from exports for funding its struggle in opposition to Ukraine, in line with the fee.
Either a most worth cap could possibly be set on all EU-wide Russian fuel imports or a single purchaser of Russian fuel could possibly be established that may negotiate particular costs, it advised. But Brussels famous such initiatives risked triggering “force majeure” clauses in firm contracts with Russian state-owned fuel provider Gazprom and a “possible escalation of geopolitical tensions”.
Another measure would contain separating member states into “red” and “green” zones, in line with which have been most uncovered to fuel provide disruptions. Prices could possibly be capped within the crimson zone whereas remaining excessive sufficient within the inexperienced zone to facilitate flows to crimson zone international locations.
Such a measure would reduce the impression on electrical energy costs however could be “complex to administer” and would depend upon an enormous quantity of co-ordination between member states, the paper stated.
French president Emmanuel Macron stated joint fuel purchases at a European degree would assist carry down prices. He additionally backed a cap on Russian fuel costs.
Macron stated Paris was supporting an EU-level levy on energy corporations which have been reaping inflated income as a result of manner the EU vitality market is structured — a measure akin to a windfall tax, one thing Germany can be contemplating.
“We support a contribution mechanism that would be targeted at energy operators, those whose production costs are far inferior to the sale price on markets,” Macron stated after talking with German chancellor Olaf Scholz.
“It’s the most coherent [way] to avoid distortions between EU countries, it’s the fairest and more effective. If such an approach did not materialise at a European level, then we’d be obliged to look at it at a national level.” the French president added.