Five reasons Europe’s response to high energy prices makes no sense
Not only do proposals put forward by the European Commission to mitigate high energy prices dangerously lock us into fossil fuel dependency, they are also riddled with contradictions and inconsistencies. Here are our top five reasons why these measures make no sense at all.
1. The problem behind the high energy prices is the market. How do they want to fix it? By not changing the market.
The EU energy market has been running wild since autumn 2021 , with electricity bills for people in Europe hitting the roof while CEOs of big energy companies publicly celebrate fossil fuel prices as a real “cash machine” for the sector. Over one year in and with the war raging in Ukraine, the Commission and Council have finally admitted, with their new set of proposals on energy, that the market is not working. While this can be considered good news, the EU’s response to it is puzzling, to say the least. You would imagine that if the problem is the market then change is in order but that doesn’t seem to be the thinking. All of the measures put forward by the Commission are accompanied by cautious warnings not to “ distort the Single Market”. The question we must ask is, if their market model is failing millions of people throughout Europe, why don’t we want to change it?
2. Struggling to pay your bills? In need of financial support? Just freeze in the dark!
While all member states are scrambling to find ways to financially support people and businesses facing rising energy costs, the EU Commission warns governments about the possible implications of reducing consumer costs. According to the Commission “if a large part of consumers get support compensating for the full price increase” they could have fewer incentives to reduce their consumption. It might be useful to remind the Commission and the Council that, as a result of decades of privatisation in the energy sector, millions of people throughout Europe cannot afford to adequately heat and light their home, with vulnerable households being locked in fossil fuel use. More than 90% of Europeans think the EU should ensure access to clean and affordable energy, so this is not an issue of lack of incentives to reduce fossil fuel use, rather it is a political failure on the part of the EU to deliver what people and the planet need so urgently.
3. We need to drop dependency on fossil fuels. How? By buying more gas, silly!
For over a month now the EU has sounded like a broken record: “we need to reduce our dependence on Russian gas and fossil fuels”, “we need to boost the energy transition”. You would think that this entails diverting investments from fossil fuels to renewables. Alas, that is not the case. In the new proposals put forward by the Commission, the focus is on swapping Russian gas for LNG gas from the US or Qatar. This, in turn, is matched by more investment in gas infrastructure which would take years to come online, further locking Europe into fossil fuel use. One could hope that this new influx of LNG in the EU energy system might reduce prices, but yet again this does not seem to be the case, with a real risk of prices rising even further.
4. The elephant in the grid : big energy and their astronomical profits
With this new set of proposals, the EU Commission puts forward a range of measures aimed at lowering electricity prices, either directly, on the retail side, or indirectly on the wholesale market. Interestingly however, the bulk of these options foresee more gas purchases and “new energy partnerships”, ensuring that public money goes directly into the hands of big energy companies. Handing over fat cheques to multinationals remains a priority, including with market interventions such as price-setting, foreseeing compensation to fossil fuel based generators. Exactly how much money should big energy continue to be allowed to make while destroying livelihoods and the planet?
5. There is no single easy answer to tackle high energy prices… really?
We beg to differ. Decades of privatisation of the energy sector have generated a volatile system which is landing people in Europe with extortionate bills, while big energy companies are filling their coffers at the rate of 220,000$ a minute. The answer to this energy crisis is actually very simple and straightforward: a publicly controlled energy system that genuinally responds to citizen needs. This would entail changing the marginalistic market, decoupling the pricing model of gas and electricity and massively investing in renewables without further delay.