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Soaring energy prices climb up EU’s political agenda

file photo: a pressure metre is pictured at the gas storage facility of hungarian state owned energy group mvm in zsana

The European Union said on Wednesday it would examine the way its power market is run and consider proposals to revamp regulations within the bloc, as it seeks to keep plans to tackle climate change on track amid record-high energy costs.

European electricity and gas prices have rocketed this year as tight gas supplies have collided with strong demand in economies recovering from the COVID-19 pandemic.

Energy prices topped the EU’s political agenda on Wednesday, with environment ministers and the European Parliament each debating the issue after country leaders discussed possible responses on Tuesday evening.

The crisis has divided member states over whether Brussels should intervene.

“There is no question that we need to take policy measures,” EU energy commissioner Kadri Simson told the EU’s parliament.

The Commission will next week publish a menu of options for how governments and the EU could react, and launch a study into whether the EU’s power market is fit to deliver the bloc’s planned transition to green energy, Simson said.

Spain and France have called for a revamp of EU electricity regulation to decouple the price of power from the cost of gas.

“We believe this framework is sound, but we see the challenges,” Simson said.

Spanish Prime Minister Pedro Sanchez said he and other countries had asked Brussels to offer an “audacious” response. “We need extraordinary, innovative measures … we have asked for a joint purchase of gas,” he said.

Not all countries are convinced. EU regulators expect gas market conditions to ease next spring and some governments say the issue is best treated with national subsidies and tax breaks to cushion consumers from high bills – measures many countries have rolled out.

“It’s mainly something for the member states to address,” Dutch Prime Minister Mark Rutte said. “We should look at what Europe can do collectively. There are proposals – some wilder, others less wild.”

The price spike has arrived as the EU prepares for an escalation of policies to tackle climate change, and stoked some countries’ concerns that steps to increase the cost of polluting fuels could add to households’ bills.

Hungarian Prime Minister Viktor Orban on Wednesday called planned green policies an “indirect tax” on citizens. “Partly the reason why the prices are up is the fault of the Commission,” he said.

Analysts have said gas prices are the main driver behind surging power costs in Europe, while the cost of permits in Europe’s carbon market has played a smaller role.

Brussels maintains that its climate plans will reduce household bills by reducing their exposure to volatile fossil fuel prices – and that if countries fail to quickly cut emissions, they would face far greater costs in the form of deadly floods, heat and wildfires.

“Let’s keep our eye on the ball. The problem here is the climate crisis,” EU climate policy chief Frans Timmermans said. “The quicker we move towards renewable energy, the quicker we can protect our citizens against high prices.”

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