May 28, 2023

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EU leaders are analyzing several options for capping gas prices

Leaders of EU member states will take advantage of their meeting later this week to consider several options for capping the price of natural gas, a topic that has been divisive in the EU for weeks, according to a new working version of the conclusions of the 20- October 21, consulted by Reuters.

EU member states have been deadlocked for several weeks on the subject of whether and how to cap gas prices, as part of efforts to keep rising energy prices under control as Europe heads into a winter with limited supplies of natural gas Russians, a cost of living crisis and a possible recession.

Some member states, including Germany, the largest European gas market, still oppose the idea of ​​capping gas prices. These states argue that the imposition of a price ceiling could lead to increased demand for gas or would put countries in a situation where they struggle to attract gas supplies from world markets.

The European Commission is to propose, on Tuesday, a set of measures aimed at countering the energy crisis, before the EU leaders’ summit.

According to a European diplomat consulted by Reuters, several member states, which are favorable to capping gas prices, are afraid that the Community Executive will not advance the options they have proposed. “The impatience is growing among the member states. So we changed gears and put all the ideas circulated on the table. This is a way to put pressure on the Commission to come up with the most concrete proposals possible,” said the diplomat.

The latest working version of the conclusions of the October 20-21 summit shows that EU leaders will agree to “explore a temporary dynamic corridor” on the price of natural gas until an alternative EU reference price is available.

Belgium, Greece, Italy and Poland want a price corridor for wholesale gas transactions

Belgium, Greece, Italy and Poland want a price corridor for wholesale gas transactions, which would mean a price range with a central value lower than the market price.

The document seen by Reuters also states that European leaders will also consider “a temporary EU reference framework to cap the price of gas used in electricity production at a level that helps reduce the price of electricity without leading to an increase in competition general on the gas market”.

Diplomats are of the opinion that a consensus could emerge regarding the capping of the price of gas used in the production of electricity, based on an option called the “Iberian model”, after the scheme implemented by Spain and Portugal in June, even if some states fear that this could lead to an increase in EU gas demand.

The diplomat consulted by Reuters emphasized, however, that the analysis of several options before the conclusions of the summit does not necessarily mean that all will be accepted. The idea is that the EU leaders do not exclude a certain solution from the start. The ambassadors of the member states to the EU will have an extraordinary meeting in Luxembourg on Monday evening to discuss this topic, the diplomat also said.

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