With the war in Ukraine bringing the topic of the EU's energy supply back to the fore, the European Economic and Social Committee (EESC) says that coordinated measures to tackle the current energy price crisis are needed but they must not undermine climate policy efforts. On top of its emergency response aimed at avoiding severe social consequences, the bloc must closely monitor the energy market and step up investment in renewables.
Measures to tackle rising energy prices must be coordinated and give each Member State enough space to respond in the manner that best fits the situation of their country. In the opinion adopted at the February plenary session and put together by Thomas Kattnig, Alena Mastantuono and Lutz Ribbe, the message is clear: those who are most affected by price increases should definitely be helped through direct financial support and also be helped to reduce their energy consumption. At the same time, they must also be enabled to participate in the generation and use of renewable energies individually or in communities and thus to benefit from lower-priced low- and zero-emission energy sources.
To avoid drastic social consequences, the EESC backs taking emergency measures but has also put forward proposals to tackle the issue from a long-term perspective. Speaking during the debate, Mr Kattnig said:
Direct financial support and tax-based instruments are the most effective and immediate measures at our disposal to help those who are vulnerable, and they need to be accompanied by specific solutions at national level in response to the actual conditions in individual countries, such as preventing the disconnection of energy supply during the cold season, long-term instalment plans and using different tax policy instruments.
Why the spike in energy prices
The reason for unusually high energy prices since last autumn comes from the sharp global increase in the demand for gas, due to a number of key factors: upward economic recovery, tightened supplies to the EU, a lack of investment because of austerity policy following the financial market and economic crises, and bad weather conditions which have resulted in reduced production of energy from renewables. In some cases, speculation and profit-making and, in particular, supply levels, have led to the emptying of gas storage facilities. Gas storage in Europe – partly owned by entities such as Gazprom – has dropped to historically low levels.
The current energy price crisis is therefore hitting people and companies in Europe so hard because the EU is highly dependent on fossil fuel imports. This, as the EESC has repeatedly stated, poses a threat to Europe's supply security: Russia exploits this dependency for geopolitical purposes and, as a result, European businesses and consumers suffer.
The skyrocketing prices that we are witnessing today are in fact the consequence of decreased gas storage and an underestimated cruel dependency on Russia's energy imports used as a weapon against the EU.
Energy independence as the key to maintain stability and security of supplies
The EU's dependency on imports must be reduced as quickly as possible, as the Russian invasion of Ukraine has emphasised. Confronted with the situation, on 8 March 2022, the European Commission published a Communication on a Joint European Action for more affordable, secure and sustainable energy, presenting a plan to make the EU independent from Russian fossil fuels, starting with gas, well before 2030.
2030 is the deadline for reaching the climate targets to which the EU is committed in the energy transition, with the ultimate goal of a climate-neutral economy by 2050. This will require huge investment but also an adaptation of the whole energy ecosystem.
At the same time, the European energy policy is lagging far behind its own ambitions: although the Commission defines energy independence as one of the strategic objectives for the Energy Union, together with putting the consumer at the centre of the energy system, the Member States have not yet succeeded in making progress.
A more efficient energy market
Another aspect concerns the energy market: the current design seems to have shortcomings in reacting to price volatility and in offering benefits to small renewable energy producers and all consumers. The Committee is strongly in favour of market evaluations testing actors' behaviour on the energy market, with reference to the EU's shared values on services of general economic interest as defined by Article 14 of the Treaty on the Functioning of the European Union (TFEU) and therefore asks the Commission to come up with a proposal that will provide an effective response to the issues and fit with the green transition.
The internal energy market needs to be complete in terms of market environment, institutions, regulatory rules and connectivity between the Member States. We also need to give more space to people to play a role in the sustainable transition and motivate them to produce the energy they need, added Ms Mastantuono.
In addition, national regulators need to play an active role in addressing consumer concerns of all kinds, for example by proactively informing them of their rights in this difficult high-price phase. New, more precise and stricter regulatory rules should be adopted for energy supply companies offering commodities to final consumers. The suppliers should be able to withstand price fluctuations in the market and not have to terminate contracts with consumers immediately. Likewise, when setting tariffs, energy suppliers must be prompted to ensure that stable tariffs continue to be available to consumers, who can then choose them rather than the so-called "floater" tariffs, which reflect developments on the exchanges.
More investment in renewables
In conclusion, mobilisation of investment in renewables is the best way to replace the dirty fossil fuels and alleviate our dependency. However, stable transitional energy sources will still be needed in order to face the increasing demand for electrification, which is generally seen as the driving force behind Europe delivering on its decarbonisation objectives.
It is therefore key to step up investment in sustainable zero- and low-carbon energy sources and to maximise efforts to increase the share of renewable energy. This could have a price-depressing effect and will certainly increase the EU's energy autonomy, making it less dependent on unfriendly regimes.
More specifically, the transmission grid system needs to be upgraded through the expansion of interconnectors and a better developed storage infrastructure.
We need incentives to motivate households and businesses to acquire energy-saving products and technologies, and produce the energy themselves. Direct assistance to those in need must be "targeted" and not "across the board". It must reflect the social dimension and not hinder the green transformation, concluded Mr Ribbe.