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EU leaders struggle on energy crisis response

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EU leaders on Friday met in Prague in a bid to bridge divisions on how to tackle soaring energy prices as they grapple with the fallout from Russia’s war on Ukraine, with no white smoke emerging.

Europe is facing an energy crunch as the price of electricity generation skyrockets because of a massive surge in gas prices caused by Russia turning off the taps.

The government of member states are scrambling to lower the costs for their consumers, but they rely on different sources for their energy and are split over the solutions.

A majority of EU states have asked Brussels to propose a cap on gas prices, but they disagree on the details.

Some capitals seek a broad cap on all gas trades and import contracts, while others prefer a limited cap in the power sector only.

The cap is among a range of proposals and initiatives by European states to cope with plummeting gas supplies from Russia, which once supplied 40% of Europe’s needs, and rocketing prices.

They have eased off this year’s peaks but remain more than 200% higher than at the start of September 2021.

Germany, Denmark, and the Netherlands oppose a cap, worried that it would make it difficult to buy the gas their economies need and dampen any incentive to reduce consumption.

At Friday’s meeting, EU Commission president Ursula von der Leyen tabled a roadmap of measures to help ease the burden, including a cap on the price of natural gas.

No consensus has been reached on how any caps could work, and leaders are not set to take a firm decision until a summit in Brussels later this month.

The five measures proposed by the President of the Commission include

– Smart electricity savings: As there is a global energy shortage, a “smart demand reduction” through a “mandatory target to reduce electricity use during peak hours”.

– Ceiling on the income of companies that produce electricity at a low cost. Electricity producers that use low-carbon energy sources see windfall profits that are not proportional to the cost of production. As the President of the Commission said, they did not expect and cannot invest. As the Commission proposes, these windfall profits should be redirected to support vulnerable people and businesses.

– Solidarity contribution from fossil fuel companies: According to Von der Leyen, a corresponding measure will be proposed for fossil fuel companies who also make windfall profits, will be making a form of “solidarity contribution”, which will be spent by the Member States to support vulnerable households and invest in renewables within the EU.

– Supporting energy supply companies facing liquidity problems: A number of energy supply companies are facing liquidity problems. Member states will therefore be allowed to “help facilitate liquidity support to energy companies” by revising the temporary state support framework so that state guarantees can be introduced promptly.

– Ceiling on the price of Russian natural gas: This move, according to Von der Leyen, is aimed at limiting Russia’s gas revenues, which the Kremlin is using to finance its invasion of Ukraine.