EU meeting tries to break gas price cap impasse

European Union energy ministers are meeting in Brussels on Tuesday to try to agree on a bloc-wide cap on gas prices after months of deadlocked talks over whether the measure will ease Europe’s energy crisis.

After weeks of infighting between countries, the European Commission proposed a price cap last month – the latest EU response to an energy crunch caused by Russia slashing gas deliveries to Europe this year, leading to severe price spikes – but a deal by the 27 member states has proved elusive.

“European citizens are in agony, European businesses are closing and Europe has been needlessly debating,” Greek Energy Minister Konstantinos Skrekas said on Tuesday, calling for a swift deal on the cap.

Greece and other countries including Belgium, Poland and Italy say a cap is needed to shield their economies from high energy prices, while Germany, the Netherlands, and Austria fear it could divert much-needed gas cargoes away from Europe.

“Probably not one member state is happy with the proposal we are discussing,” said one senior EU diplomat, who described the gas price cap as “one of the most complicated and difficult files you can imagine”.

Other diplomats said they were not sure if there would be a deal. One option could be to escalate the talks to a meeting of EU country leaders on Thursday, and then try again to have ministers approve the price cap next week.

TECHNICAL DETAILS

Any deal could rest on technical details including how high the price limit is, which gas contracts it applies to, and safeguards such as enabling the EU to immediately suspend the cap if it has unintended consequences.

Hunting for a compromise, the Czech Republic – which holds the EU’s rotating presidency – drafted a new proposal that would trigger the cap if prices exceed a range of 200-220 euros per megawatt hour over three to five days on the front-month contract in the Dutch Title Transfer Facility gas hub, and were also 35 euros higher than a reference price based on existing liquefied natural gas (LNG) price assessments.

That is below the 275 €/MWh price cap proposed by the European Commission. A previous compromise had included a 220 €/MWh limit but a dozen countries including Greece and Italy asked for it to be even lower.

The pro- and anti-cap camps of countries could each have enough votes to block a deal. A potentially decisive nation is France, which initially backed a price cap but last week expressed concerned over the potential fallout in financial markets, three EU country diplomats said.

French ecological transition minister Agnès Pannier-Runacher said on Tuesday a key aim of the price cap would be to “ensure the stability of the financial markets”.

Last week the Intercontinental Exchange ICE.N warned the EU proposal could drive gas prices higher, while the European Central Bank said it may jeopardise financial stability.

The EU has already agreed a raft of emergency energy measures this year, including gas storage requirements. But the cap may decide the fate of other policies – including faster permits for renewable energy projects – after countries opted to withhold approval last month without a deal on the gas price cap first.