The EU & the energy crisis: “Fake it till you make it”
Belgium, (Brussels Morning Newspaper) Are you having a hard time understanding what the “dynamic gas price cap” proposed by the European Commission is? Wondering how this will cut energy bills? You’re not alone. Not even the Commission is too clear on it, simply because it still doesn’t exist.
The EU Council and Commission are hiding behind a flood of documents and catchy names, but their proposals are nowhere near sufficient to address the magnitude of this energy crisis. People in Europe are tired of this institutional flurry; they expect lawmakers to act in the interest of the common good.
The Commission has yet to fully come to terms with the failure of the energy market. Despite President von der Leyen recognising that “it is not fit for purpose”, her institution is struggling to come up with consequential interventions. If the Dutch Title Transfer Facility (TTF) is not representative of the current gas market, are we sure it is worthwhile keeping it? This is what the Commission is proposing, leaving weak alternatives for the future. The new LNG benchmark will only be operational in a year’s time, and it will be little more than a proposal, with no certainty of its impact. Once again the European Union places its bets on the “rationality of the market”, trusting that it will make the right choice. This however is a risky gamble in a context where Big Energy distributes dividends to shareholders and families struggle under the weight of burgeoning bills and stagnant wages.
The dynamic gas price cap at the moment is not even a proposal, it’s a fuzzy idea. The Commission is asking the Council for its green light for a mechanism that can limit “extreme prices”. This begs the question of how and who will determine the threshold of “extreme”. Will they take into account production costs? Will the wholesale gas prices paid by companies be finally made transparent and public? Nothing indicates that the Commission and Council proposals will follow this path.
Another worrying development is the proposed measures to safeguard companies operating in the financial markets. The Commission proudly announced two interventions that will “ease the liquidity stress currently experienced by some energy companies”. These entail expanding “the list of eligible assets that can be used as collateral” and raising the commodity threshold “from 3 to 4 billion euros”. This is a déjà vu of the 2008 banking crisis, when regulatory standards were relaxed to mask structural flaws. We all know how that story ended.
Even on apparently less controversial issues such as energy savings, some unresolved question marks remain. While there is no doubt that reduction of consumption is urgently needed, how this takes place has an enormous impact on people’s daily lives and on the future of small businesses. Energy saving measures need to be targeted first and foremost at those who over consume, otherwise they run the risk of worsening existing inequalities, dragging more people into poverty. The Commission’s official advice when it comes to energy saving includes measures such as replacing single-glazed windows with double-glazed ones. Tone-deaf. For most families struggling to cope with the rising cost of living, such an expense is simply unthinkable.
For over 12 months member states and European institutions have been passing the buck on rising bills, failing to provide the “unprecedented measures” they promised. This is not the time to be asking big polluters, such as fossil fuel companies, for symbolic “solidarity contributions”. Now is the time to radically reform a broken energy sector which has been exclusively benefitting polluting energy companies at the expense of the planet and working class families.
The shortsighted proposals coming from the Commission and Council over the past year have nothing to do with solidarity. Rather, as European institutions drag their feet, energy and fossil fuel companies continue to register record profits while working people see their wages eaten up by inflation and the rising cost of living. Are EU leaders up to the task of reversing this trend?