All EU governments more or less agree that the long-term response to surging energy prices is to accelerate the transition to renewable power and promote energy savings through schemes like building renovation programmes.<\/p>\n\n\n\n
Yet when faced with the current global surge in energy prices, they have \u2013 understandably \u2013 resorted to short-termism with tried and tested methods: market intervention and social schemes to support the poorest households.<\/p>\n\n\n\n
In France, where the 2022 presidential election campaign is already underway, the government has offered a \u20ac100 one-off payment to low-income households<\/a>. <\/p>\n\n\n\n Prime Minister Jean Castex went further on Thursday last week, announcing that prices will be frozen in France as of 1 October<\/a>, following an increase of 12.64% and 4% for gas and electricity respectively. No doubt the \u2018Yellow Vests\u2019 protests that swept across the country in 2018 were on their minds when they took that decision.<\/p>\n\n\n\n Across Europe, similar measures are cropping up. In Greece, the government is planning subsidies to help households shoulder higher energy bills; while in Italy, Prime Minister Mario Draghi announced a \u20ac3 billion package targeted at the most vulnerable households.<\/p>\n\n\n\n In Spain, taxes on electricity have been temporarily suspended, while the government has drawn the ire of power companies<\/a> by introducing a tax on windfall profits of energy firms.<\/p>\n\n\n\n All these measures have one thing in common: they undermine the energy transition.<\/p>\n\n\n\n Although they may be necessary in the short term, caps on energy prices and subsidies for heating fuel are also indirectly a cheque in the pockets of Russia\u2019s Gazprom and Norway\u2019s Equinor \u2013 Europe\u2019s two biggest gas suppliers. <\/p>\n\n\n\n And exceptional taxes on power companies are only drawing resources away from electricity firms looking to invest in long-term solutions like renewables.<\/p>\n\n\n\n At a time when \u20ac260 billion is needed every year for the energy transition until 2030<\/a>, this can hardly be seen as an investment into a future-proof, resilient energy system. It\u2019s also a disastrous message to developing countries<\/a> in the run-up to the UN climate summit in Glasgow.<\/p>\n\n\n\n Yet, the debate on energy prices is also exposing an inconvenient truth: as the energy transition progresses, oil and gas prices will become increasingly volatile, making fossil fuel subsidies paradoxically even more necessary to shield the poorest households from wild price fluctuations.<\/p>\n\n\n\n Claude Turmes, the energy minister of Luxembourg, alluded to this during a briefing with journalists on Friday. \u201cThe question is whether there will be more volatility on energy markets on the way to climate neutrality in the long term,\u201d he said. <\/p>\n\n\n\n \u201cAnd that is something which is not completely surprising, because fossil investments are less secure in the mid to long term and so safety margins in these markets are probably smaller.\u201d<\/p>\n\n\n\n French economy minister Bruno Le Maire used similar terms at a meeting of EU finance ministers in Luxembourg earlier this week.<\/p>\n\n\n\n \u201cThere will be a long-term increase in energy prices because of the environmental transition,\u201d Le Maire said as he entered the meeting on Monday (4 October). \u201cFor years, not months, we will have to face an increased level of prices because there is a need for more electricity\u201d coming from renewables and nuclear plants, he said.<\/p>\n\n\n\n As the European Commission draws up a \u201ctoolbox\u201d of measures<\/a> for governments to respond to the crisis, the issue of energy subsidies, as well as their social and long-term environmental impact, will no doubt be central to its thinking. <\/p>\n\n\n\n \u2013 Fr\u00e9d\u00e9ric Simon<\/em><\/p>\n\n\n\n Good morning from Luxembourg!<\/p>\n\n\n\n Today I\u2019ll be covering the meeting of environment ministers (the Environment Council) from Luxembourg. There\u2019s a packed agenda for today<\/a>, including discussions on the COP26 climate summit, the Fit for 55 package, forestry and energy prices.<\/p>\n\n\n\n On COP26, Poland, Bulgaria and Slovakia currently stand in the way of the EU finalising its position going into the summit. That is because they are baulking at the idea of having to report on climate progress every five years rather than every 10 as is the EU norm. There is a concern that could create more scrutiny for countries, something these three clearly do not want.<\/p>\n\n\n\n But the EU needs to come up with a deal in order to go into COP26 with a strong position. It may be a little tricky to get international consensus when the EU cannot find agreement among its own members. Watch the wording of the final deal for loopholes.<\/p>\n\n\n\n On Fit for 55 we are not expecting many \u201cfireworks\u201d according to an EU diplomat. EU countries have only just read through the package of proposals, tabled in July, and some are still making their minds up about some of the files. However, there may at least be sparks around the proposal for the emissions trading scheme, which has already drawn criticism from EU countries<\/a>.<\/p>\n\n\n\n