EU move to cap gas prices this winter less likely after summit

A joint declaration by the European Union’s 27 leaders in Brussels avoided a public split over how to tackle the continent’s energy crisis, but failed to resolve profound differences that may make a new market intervention all but impossible to secure in time to affect bills this winter.

Though ideas for how and where to impose gas caps vary, calls to urgently impose one in some form reached a crescendo ahead of this week’s summit as countries with tight budgets sought a new way to force down energy bills in the face of public anger.

But cautious member states, including Ireland and Germany, fear the possibility that such an intervention could endanger supply by leading suppliers to sell their gas elsewhere or producing other unintended consequences.

The compromise agreement reached in the early hours of Friday endorsed proposals including the joint purchase of gas, which should help for next winter by preventing a repeat of a bidding war between EU states that drove this summer’s gas price spikes.

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But leaders in effect agreed to refer ideas for gas caps back for further study and discussion − something that makes proponents of the measures nervous that the opportunity to intervene in time for this winter may be slipping from sight.

Prices paid for gas on the wholesale markets take time to filter down to consumer and business energy bills, meaning that such a measure could only impact bills this season if it came into effect soon.

‘Concrete decisions’

The joint conclusions urged energy ministers and the European Commission to “urgently submit concrete decisions” on two ideas for caps.

They commissioned more work on the idea of a “temporary dynamic price corridor on natural gas transactions to immediately limit episodes of excessive gas prices” − a restriction on how much the gas price can swing within a single day, which was suggested by the European Commission earlier this week.

In addition, they endorsed the further development of “a temporary EU framework to cap the price of gas in electricity generation, including a cost-and-benefit analysis”, while setting a high bar by stipulating that such any proposal should ensure that it neither accidentally incentivises gas use nor subsidises energy that flows out of the EU to buyers abroad.

Yet leaders expressed relief that they had managed to agree on a face-saving compromise, and relatively quickly too.

“When we met before the first meeting, we thought we would stay the whole weekend,” Luxembourg prime minister Xavier Bettel told journalists.

‘Homework’ for ‘specialists’

“We should leave to the specialists the homework to do, to get an answer not in a few weeks or months but in the next days,” he urged.

Countries that favour gas caps hope that one can be agreed when ministers for energy meet this Tuesday. Under EU rules, energy ministers can pass agreements with just a qualified majority of support, or roughly 15 members out of 27 − meaning that a cap would have a greater likelihood of being approved.

But Germany has suggested an extraordinary summit of leaders should be held to discuss the issue again next month. Unanimity is required to pass agreements in such summits, meaning that Berlin could veto a cap if it chose.

Some leaders pointed out that the price of gas had fallen since the summer, meaning perhaps the mere talk of caps had been enough

“The gas price has come down because we have given signals to the market that we intend to do something,” said Estonian prime minister Kaja Kallas, adding that gas prices were now about €130 per megawatt hour compared to €100 before the war − far below the summer peaks of €300.

Others pointed out that capping the price of gas could reduce the money available to governments from plans to tax and redirect extraordinary revenues and profits from energy companies to subsidise household and business bills −a windfall measure agreed just last month.