‘No substance’ price ceiling for gas leaves everyone disgruntled

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A European Fee proposal to restrict the value of fuel, which it introduced forward of a vital assembly of vitality ministers on Thursday (24 November), was instantly slammed by specialists and politicians alike.

A gaggle of 15 international locations, together with Spain and Greece, had pushed for a value ceiling to forestall fuel costs from reaching the acute heights seen in August.

However the fee plan capped the value at €275 per megawatt-hour and would solely activate if costs exceeded that degree for 2 weeks straight. This cover is so excessive many rapidly deemed the proposal ineffective.

“We requested the fee for a proposal, and it comes up with this: a joke,” Teresa Ribera, the Spanish minister for vitality transition, mentioned on Wednesday, in keeping with Europa Press, a Spanish information company.

“A joke? Sure, I can agree with that description,” Dutch vitality knowledgeable Jilles van den Breukel on the Hague Centre for Strategic Research (HCSS) advised EUobserver. “This cover does not have a variety of substance. I feel it is vitally inconceivable that the restrict will ever be examined.”

Even in August, when wholesale fuel costs exceeded €300 per MWh, the value ceiling wouldn’t have been triggered as costs remained above €275 per MWh just for every week. And with fuel futures now buying and selling at €113 per MWh, the proposed value cap appears far off.

The group of 15 member states led by Spain will doubtless attempt to cut back the cap to a decrease degree. “The fee goes to listen to very robust issues tomorrow from the overwhelming majority of ministers,” Ribera mentioned.

This doubtless means one other spherical of intense debate, as Germany, Netherlands, and Denmark have to this point been unwilling to comply with any value restrict — even a excessive one — fearing decrease costs would increase demand, which, in flip, would additional exacerbate the fuel crunch.

Not a ‘non-policy’

Consultants are inclined to agree. Capping the fuel value does not clear up the basic drawback, which is “a scarcity of Liquified Pure Gasoline,” van den Breugel mentioned.

And Lion Hirth, professor of vitality coverage on the Berlin-based Hertie College, advised EUobserver: “you’ll be able to’t decrease costs with out growing demand.”

“I see folks making enjoyable of the proposal, collectively calling it a ‘non-cap’, however I’m a little bit extra cautious,” Hirth mentioned.

“What seems like a really excessive value as we speak will not be excessive tomorrow. In reality, what we now contemplate moderately low-cost was extraordinarily excessive solely a 12 months in the past,” he mentioned. “This isn’t a non-policy. It might come into impact, after which it might do actual hurt,” he mentioned.

Shield shoppers immediately

As a substitute, Hirth says governments ought to focus their consideration and sources on measures immediately defending households and companies.

As a part of an knowledgeable advisory group to the German authorities, Hirth co-drafted a plan that limits the value households and small and medium-sized corporations pay for fuel.

It solely covers 80 % of their earlier consumption. Market costs apply to the remaining 20 %. This leaves incentives to eat much less, whereas defending folks towards extreme costs.

The German authorities has since adopted the plan, which is anticipated to come back into motion on 1 March 2023.

Such measures, nevertheless, are costly and will not be inexpensive for much less rich EU international locations.

In October, Italy, France, Portugal, and others known as on the EU to step in with a brand new pandemic-type borrowing fund to assist international locations finance their nationwide help schemes. However such a fund has been blocked by Germany and Netherlands.

And thus, talks a couple of value cap on wholesale fuel, which lowers costs for everybody, proceed.

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