Vitality disaster: EU international locations set to debate value cap on fuel and its potential dangers

The concept of imposing a value cap on fuel imports and transactions is about to prime the agenda of an off-the-cuff assembly of EU international locations in Prague.

It comes a day after the European Political Group, which gathered greater than 40 European leaders from everywhere in the continent, together with the UK, Norway and Turkey.

On Friday, it will likely be simply the 27 EU international locations across the desk, with one essential query up within the air: how can the bloc curb hovering fuel costs.

A letter penned by European Fee President Ursula von der Leyen is anticipated to function foundation for discussions.

On Wednesday, von der Leyen instructed a brand new set of emergency measures to tame the skyrocketing electrical energy payments that households and corporations are dealing with, that are strongly pushed by fuel, the costliest gasoline wanted to satisfy all energy calls for.

What’s the European Fee proposing?

Von der Leyen proposed not one, however two fuel caps.

The primary cap ought to apply to market transactions that happen every single day on the Dutch Title Switch Facility (TTF), Europe’s main buying and selling hub, in a bid to comprise hypothesis.

The second cap ought to goal the worth of fuel that’s used just for the manufacturing of electrical energy. This seems to be much like the Iberian mannequin already adopted by Portugal and Spain, which partially covers the massive prices bore by gas-fired energy crops.

In her letter, von der Leyen mentioned that each caps signify a profound intervention out there and entail dangers for the bloc’s safety of provide. If EU international locations are keen to simply accept these measures, they have to agree on stricter financial savings plans and signal legally-binding solidarity offers to deal with potential shortages.

“We have to acknowledge the dangers {that a} cap on fuel costs entails and put in place the required safeguards,” von der Leyen mentioned.

Fuel cap dangers

Vitality consultants warn that any form of value cap would put an finish to the worth indicators that govern the free market and power governments to barter over the allocation of provides, probably via rationing plans.

However an growing variety of member states seem able to undertake the unprecedented caps. 

Italy, Poland, Belgium and Greece circulated their very own proposal for a broader wholesale cap that might embody all fuel imports getting into the bloc and all fuel transactions.

Of their view, the cap, which they name “value hall,” needs to be versatile and dynamic, appearing as “circuit breaker” slightly than suppressing charges at an artificially low degree.

“A cap solely on fuel used for electrical energy ignores 2/3 of the fuel market, which is in trade and buildings,” the international locations wrote, in a doc seen by Euronews. 

Nonetheless, some international locations, like Germany, Austria and the Netherlands stay sceptical concerning the concept of capping fuel costs, fearing it will incentivise consumption at a time when financial savings have turn out to be essential.

In addition to power, EU leaders are anticipated to debate the newest developments in Russia’s invasion of Ukraine and the worsening financial state of affairs throughout the bloc.

For the reason that assembly is casual, no formal conclusions might be adopted, though international locations may give the Fee an orientation on how one can proceed with its subsequent set of legislative proposals.

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