What the energy crisis means for Europe’s green ambitions

What the energy crisis means for Europe's green ambitions

A woman cycling walks past a power station in Neurath, Germany.

Nurphoto | Nurphoto | Getty Images

LONDON – The European Union could struggle to push forward on its green agenda as gas prices climb across the bloc, experts warn of slowing investment in the sector.

The European Commission, the EU’s executive body, has pledged to become carbon neutral by 2050, proposing a concrete plan to reduce greenhouse gas emissions by at least 55% compared to to 1990 levels by the end of this decade.

However, those ambitions could be shaken in the form of natural gas shortages on the continent pushing up prices. Next month’s gas price in the European benchmark, Dutch TTF Hub, has risen more than 250% since the start of the year. It was trading at around 74 euros ($ 87) per megawatt hour on Tuesday – just short of its record of 79 euros reached last week.

You can’t stop funding wind turbines for people’s bills.

jacob kierkegaard

Principal Investigator, German Marshall Fund of the United States

The recent peak is already having a tangible impact. For example, Spain has announced emergency measures to limit the benefits energy companies can derive from alternatives to gas, including renewables. The government also hopes to reduce what consumers pay for their electricity.

“Rising energy prices have affected economies across Europe, and while Madrid’s actions are emulated elsewhere as governments prioritize cheaper energy over the green transition, efforts to the EU to advance global climate action could be significantly reduced. ” Reliability could take a hit, ”Henning Glostein, energy director at consultancy Eurasia Group, said in a note on Friday.

Spain is not the only country to limit the rise in energy prices, with France and Greece taking similar measures. But the plan has been the subject of some criticism in Spain.

Iberdrola, a Spanish energy company focused on renewables, said the move “would undermine investor confidence in the country” at a time when the country needs private finance to achieve its climate ambitions.

If we had had a Green Deal five years ago, we wouldn’t have been in this situation.

Francis Timmerman

EU chief climate officer

“The risk to climate policy making is likely to be the loss of credibility ahead of the COP26 global climate talks in Glasgow later this year,” Glostein told CNBC via email.

“If we see the richest countries in the EU granting energy subsidies to households that source fossil fuels, it will be difficult for the EU to stop subsidizing the consumption of fossil fuels to poorer countries. Might ask, ”Glostein said.

Meanwhile, Jakob Kierkegaard, senior researcher at the German Marshall Fund, an American think tank, said he was not too concerned at this point, but the current energy crisis “makes it even more important that the Spanish government research other sources of funding. ” look for.

“You can’t stop funding wind turbines for people’s bills,” he said, adding that countries shouldn’t cut back on their investments in green energy.

The fault of the EU?

However, there is a larger problem: Some European leaders and lawmakers have blamed the EU for rising energy prices.

For example, Polish Prime Minister Mateusz Morawiecki said earlier this month that “Polish electricity prices are linked to EU climate policies,” according to Politico.

When asked if such comments could harm the EU’s green ambitions, Kierkegaard said: “There is absolutely a risk as the Polish government clearly wants to take more money out of the EU for the green transition. . “

Steam escapes from the cooling towers of Turo’s coal-fired power plant operated by PGE SA in Bogatynia, Poland.

Bloomberg | Bloomberg | Getty Images

Poland said on Monday it would keep the coal mine in operation even if the European Court of Justice ruled it must be closed. Under the same decision, Krakow is required to pay a fine of 500,000 euros for each day it keeps the mine open.

EU climate chief Frans Timmermann insisted the price hike was not the bloc’s fault. “Only a fifth of the price increase can be attributed to rising CO2 prices,” he told the European Parliament earlier this month. “The others are almost lacking on the market. “

“If we had had the Green Deal five years ago, we would not have been in this situation because then our dependence on fossil fuels and natural gas would have been less,” he said.

“Fair green transition”

Kierkegaard said it was “too early to tell” whether the price hike would undermine the EU’s green ambitions. The biggest risk, in his view, is whether public support for a green economy wanes because it is perceived to have an impact on their bills.

The European Commission announced earlier this summer that special funds would be allocated to support the most vulnerable segments of the population in this green transition. The question is whether this will suffice.

“It must be a real green transition,” Commission President Ursula von der Leyen said in a speech last week. Europeans are suffering.

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