EUROPE HAS been battered by soaring energy prices since Russia’s bloody invasion of Ukraine. In response Ursula von der Leyen, the president of the European Fee, has proposed reforms to the EU’s electrical energy market and unveiled plans for a proposed windfall tax on power firms. Power ministers will meet on September thirtieth to debate the small print. In the meantime Europe is investigating attainable acts of sabotage to Russia’s Nord Stream gasoline pipelines, one in all which was till just lately one of many most important conduits of Russian gasoline to Europe. It will be a stark reminder of the Kremlin’s oft-demonstrated willingness to wage power warfare on Europe.
Higher co-ordination throughout the EU is required. To date, Europe’s governments have different wildly of their response to excessive power costs. Some have protected customers by imposing retail worth caps, granting gasoline subsidies or chopping consumption taxes on power payments. Others have allowed power companies to cross on increased wholesale costs to prospects, preferring to focus on serving to the low-paid instantly. Beneficiant untargeted assist could also be socially or politically expedient. But it surely additionally dangers undoing incentives to limit energy use (see chart).
As may be anticipated, figures compiled this month for Bruegel, a think-tank, level to a correlation in several European international locations between the extent of family gas-price rises and the drop in demand for gasoline. Broadly talking, the smaller the rise in costs in July 2022 in contrast with the primary half of 2021, the much less year-on-year family demand for gasoline dropped within the first half of 2022. In different phrases, increased costs seem like linked to decrease power use.
France, for instance, has frozen gasoline costs this 12 months and capped electrical energy worth rises at 4%, for households. In his funds unveiled on September twenty sixth Bruno Le Maire, the finance minister, confirmed that this “worth protect” would proceed into 2023, though the worth of each gasoline and electrical energy would then be allowed to rise by 15%. These measures come at a giant value, however they’ve sheltered French households from the hefty worth will increase in international locations like Britain. That the French didn’t a lot cut back their use of gasoline within the first half of this 12 months could partially be as a result of the worth freeze gave them little incentive to take action. In Denmark, then again, the place gasoline costs have risen steeply, the federal government has concentrated efforts on serving to the poorest households. It has paid out a “warmth cheque” to greater than 400,000 households to assist with payments. General family use of gasoline has dropped by greater than 3 times as a lot as in France.
Governments, after all, produce other issues to consider. Worth incentives for greener behaviour are sometimes neither in style nor politically straightforward to handle. In France, recollections of the gilets jaunes (yellow jackets) rebellion of 2018-19 are nonetheless recent. This was a revolt prompted partially by an increase within the tax on motor gasoline on the pump. Some greener behaviour will be inspired by public-information campaigns and intelligent management. But if societies are to arrange for a lower-carbon future whereas defending poorer households, in some unspecified time in the future they need to let costs rise with the intention to discourage extreme use. ■
