The community executive asks to turn to new producers to avoid that the reserves remain empty
Tax breaks, taxing the extra profits of companies, reinvesting the proceeds from European taxes on CO2 emissions. Faced with rising energy prices and uncertainties related to Russian supplies, the European Commission is trying to take action with a strategy for the Member States. “There is no intention to create new debt securities” to deal with the situation, explains executive vice president Frans Timmermans, responsible for the European Green Deal, the sustainability strategy that also affects the energy sector.
In Brussels it is believed that the situation can still be managed within the existing regulatory framework, and the communication to the Member States contains at least four lines of action. First of all, it is clarified that the Twenty-seven can offer “temporary help” to companies that face liquidity needs due to the current high energy prices, “regardless of their size, on the basis of the rescue and restructuring guidelines”. It is therefore open to state aid, linked to the situation and considering that at least for the whole of 2022 the stability pact will remain suspended.
In order not to burden the public finances, to finance these emergency measures, governments are invited to consider “temporary fiscal measures” on unexpected profits. In other words: revenue rates. By doing this, the Commission estimates after consultations with the International Energy Agency, such levies could make up to € 200 billion available in 2022 to partially offset higher energy bills. “We will provide the Member States with clarification on what is meant by additional profits,” assures Commissioner for Energy, Kadri Simson.
But it doesn’t stop there. There is the ETS mechanism for greenhouse gas emission allowances, in particular CO2. An extra tax on revenues higher than expected is also suggested. From 1 January 2021 to 28 February 2022, the revenues generated by the auctioning of EU ETS allowances amounted to around € 30 billion, and one can imagine drawing on here as well.
The EU executive calls for action already now for energy security. We are asking to turn to new energy producers to break away from dependence on Moscow, and ensure that the reserves do not remain empty. The existing storage infrastructures in the EU would be filled “to at least 90% of their capacity by 1 October each year”. How can this be done? The communication offers suggestions by indicating new business partners.
Each year the EU could import 50 billion cubic meters of liquefied natural gas by purchasing from Qatar, the United States, Egypt and West African countries. Pumping gas through the pipes of Algeria, Azerbaijan and Norway could replace 10 billion cubic meters of gas currently bought in Russia. One way forward, because “storage isn’t a real life jacket,” Simson acknowledges.
Diversify partners, and at the same time energy sources. There is an insistence on LNG, as well as on clean hydrogen. With the appropriate investments and efforts, producing 15 million tons of this renewable source could do without an estimated amount of Russian gas between 25 and 50 billion billion cubic meters by 2030. Another 2.5 billion cubic meters of Russian gas could be replaced by “accelerating” the development of photovoltaic panels. “It is time to address our vulnerabilities and quickly become more independent in our energy choices,” insists Timmermans, who invites us to move into renewable energy “at the speed of light”.
Then there is an invitation to domestic and professional responsibility. It is believed that lowering the heating temperatures by 1 degree could save another 10 billion cubic meters of gas in the same energy bill that the EU pays to Moscow. “A small change in our habits can have a huge impact.” Of this Timmermans and the college of commissioners are sure. Their strategy would allow, in theory, a potential saving of 47.5 to 77.5 billion cubic meters of gas per year. A way to lower the cost of energy, to which are added the compensatory measures left to national action, but in compliance with the twelve-star coordination.
The proposal, which is not legislative but consultative, will now be at the heart of the reasoning with the Member States. The Commission expects a green light and a mandate to act at least as a control room. The legislative proposals are ready, and they intend to set up a European mechanism. The heads of state and government will start thinking about it already in the next few days. On Thursday and Friday in Versailles the leaders of the Twenty-seven will discuss this.
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