EU leaders converge to pin down proposals for gas price caps

European Union leaders thrashed out their differences over how the price of gas could be capped as a way to force down energy prices and stave off economic turmoil on the Continent in a Prague summit on Friday.

Various member states had proposed different forms of gas price capping in the run up to the summit, while a plan by Berlin for a massive national intervention to subside household and company bills caused tensions due to its potential to give German businesses an advantage and keep prices high for all.

Several leaders stressed the importance of the EU taking action jointly to avoid member states bidding against each other and driving prices even higher.

“Right now everybody is suffering due to the high energy prices, and we have to have a common solution to that. Otherwise those countries who have much more money in their budgets just out-pay the others and that’s detrimental to the single market,” said Estonian prime minister Kaja Kallas.

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“Different packages where we outcompete each other are not good for the overall unity.”

The leaders had discussed jointly purchasing liquefied natural gas so “we don’t compete with each other”, she said.

Latvia’s Krisjanis Karins said it was essential to force gas prices lower. “There are a number of mechanisms that it could be done, but it can only be done at a European level, we cannot as individual member states do this,” he told journalists.

“If we can get the price of gas down in Europe we can help our economy, help our citizens, but we have to also do that to maintain the support among our citizens for the war effort against Russia and continuing to support Ukraine.”

Proposals

A group of 15 member states called for the EU to introduce some form of price cap in advance of the summit.

Proposals include an extension to the whole EU of the so-called Iberian model in place in Spain and Portugal, which involves the state limiting the market price of gas used for electricity generation and subsidising generators for the difference. Critics of this plan say that gas consumption has risen in Spain, and that prices have not fallen as much as hoped.

Italy has suggested a dynamic price cap that would vary according to market fluctuation, while the European Commission has suggested two caps: one applying to market transactions relating to the Dutch Title Transfer Facility trading hub, and another on gas used for electricity production.

However, commission president Ursula von der Leyen warned in a letter to EU leaders that such market interventions risk endangering security of supply if gas providers choose to sell elsewhere.

“Price caps ... the question is where to put them and how to put them,” she told journalists as she entered the summit.

The EU’s chief diplomat Josep Borrell told reporters that the issue of energy prices had become “an economic issue as much as a security issue”. He pointed to the decision of the Organisation of the Petroleum Exporting Countries (Opec) — the world’s top oil producing countries — to sharply cut oil production, potentially driving up prices.

“Russia is playing games with the price of gas certainly. Look at Opec, with their decision to decrease the supply of oil which is a clear answer to our proposal to cap the price of oil,” Mr Borrell said.

“It means energy is becoming the most important geostrategic issue today, related with the war, but also the balance of power in the world.”

Officials are expected to fine-tune technical proposals for gas caps in advance of an EU leaders’ summit in Brussels later this month.