Soaring power prices drive anxiety over EU climate plans

Concerns about a 'bloody hard' energy transition dominated climate debate in the European Parliament.

Soaring power prices drive anxiety over EU climate plans

Surging energy prices are weighing on European wallets — and the bloc’s climate plans.

Concerns over a popular backlash were evident Tuesday when members of the European Parliament debated the European Commission’s Fit for 55 climate legislation proposals.

“Citizens start asking questions,” said Anna Zalewska of Poland’s ruling Law and Justice party. “First of all, they ask about price increases across the board, because it’s them who are going to foot the final bill. It’s them who are going to unfortunately pay for the ambitions of the EU.”

Polish Prime Minister Mateusz Morawiecki points the finger at Brussels. “Polish power prices are tied to the EU’s climate policies,” he said last week.

The Commission insists that those prices aren’t the fault of the EU’s Emissions Trading System, which has seen the cost of a permit to emit a ton of CO2 more than double over the last year to around €60. The power price increase is instead largely driven by high gas prices and structural issues in Europe’s electricity market — but the Commission is still wary of its net-zero Green Deal project getting the blame.

Commission Green Deal chief Frans Timmermans told MEPs Tuesday that just “one-fifth” of the higher power costs could be attributed to the rising ETS price, with the rest caused by low gas supply. 

He argued that those increasing costs actually strengthen the case for a rapid shift to cleaner energy sources.

Some MEPs sided with Timmermans. “We need to act radically, but there is a problem: Slovakia and Europe are facing rising power prices, and this puts the most vulnerable and poorest at a disadvantage. Why? Because of our dependence on fossil gas,” said Slovak lawmaker Martin Hojsík of Renew Europe. 

The political danger to the Commission’s Fit for 55 program is obvious.

Pascal Canfin, the French MEP who chairs the Parliament’s environment committee, said his liberal Renew Europe group opposed the Commission’s proposal to expand emissions trading to road transport and buildings. 

“We believe that the political cost is extremely high and the climate impact is very low,” he said.

In response to a reporter’s question about the risk to the Green Deal if the costs were laid on the middle class, Green MEP Philippe Lamberts said: “How can you imagine that we are not thinking about this? Are we so stupid?” 

A Continental problem

Governments across the EU are feeling the pressure.

In Italy, electricity bills have risen by 20 percent in the last quarter and are expected to rise by 40 percent from October, according to Minister for the Ecological Transition Roberto Cingolani. He told POLITICO he agreed with Timmermans that the lesson from the current price hikes was that “we should be super fast in increasing the renewable energy power stations.”

Despite this, Cingolani was alive to the political risk. “You’re measuring directly the impact of the decarbonization concept,” he said, warning that people “should not perceive that the transition means you pay more for electricity and that’s all.” With people being forced to make wrenching changes to their lives, such a “historical transformation” carries costs and will be difficult.

In Spain, the government is facing a political crisis caused by record-breaking power prices — which have tripled to €172.78 per kilowatt-hour over the last half-year. On Tuesday it approved measures to lower bills with temporary tax cuts, limiting the amount that prices can rise, and clawing back about €2.5 billion in utilities’ profits to redistribute to consumers. The goal is to keep bills about where they were in 2018.

“We are going to reduce the profits of energy companies and redirect the benefits to consumers,” Prime Minister Pedro Sánchez said.

Outraged nuclear power companies threatened to shut down their reactors — which supply about a fifth of the country’s power — early if the government goes ahead with its plan.

The Greek government said Tuesday that it would spend €150 million to cut consumer bills through the end of the year.

“There is an international energy crisis,” Energy Minister Kostas Skrekas told reporters. “Our government has decided to support those who have seen their bills growing.”

The problem, said Cingolani, is that Europe is part-way through its transition toward 100 percent clean energy, with “a mix of old and new power sources in which the carbon dioxide will increase its price.” 

Market signals

The idea behind the ETS was to put a price on carbon, imposing higher costs on polluting energy sources like oil, coal and gas and encouraging low-carbon energy like solar, wind, hydro and nuclear. But countries have been closing both coal-fired plants and nuclear power stations — and when there’s less wind and sun available, it’s increasingly natural gas purchased on global markets that fills the gap.

Currently “wind generation is low, and in some markets there are a high number of plants offline,” said Glenn Rickson, head of European power analysis at S&P Global Platts. “With the general closure of coal plants in recent years … there is reduced scope to shift away from gas generation when gas prices get high, which in turn feeds back into the gas price.” 

The EU is now being squeezed as global gas prices soar.

It’s made worse by the structure of EU wholesale electricity markets, where the most expensive power source used to meet total demand sets the price for the entire market. That means high gas prices drive up overall costs even if the fuel is responsible for only a small part of overall power generation.

As the Fit for 55 proposals make their way through Parliament this winter — and gas prices are expected to surge even higher as Europeans turn on heating this winter — the Commission will likely face complaints for months to come. 

“The one thing we cannot afford is for the social side to be opposed to the climate side. I see this threat very clearly now that we have a discussion about the price hike in the energy sector,” Timmermans said.

The green transition, he said, is “gonna be bloody hard, and nobody should have any illusions that this is going to be easy.” But he urged lawmakers to avoid the “trap” of talking “all the time about the cost of the transition and avoiding to talk about the cost of non-transition.”

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The end of Euro-bashing

Euroskeptic posturing might win politicians votes at home, but it's increasingly costing them on the European stage.

The end of Euro-bashing

Alberto Alemanno is Jean Monnet professor of EU law at HEC Paris and the founder of the civic startup The Good Lobby. 

Michel Barnier’s recent attack on the power of the European courts caught many by surprise. How is it that the EU’s former chief Brexit negotiator transformed himself from the most strenuous defender of EU integrity into a patriotic champion of French self-interest against the Union? 

Simple. Upon reentering the French political arena as a presidential hopeful, Barnier — the great European — unabashedly played the ultimate domestic political card: EU-bashing. 

This longstanding practice of shifting the blame for domestic problems from national politics to the Union via inaccurate statements has long been electorally rewarding. Tacit collusion among national politicians, combined with a mutually profitable alignment with mainstream media, has entrenched EU-bashing into political systems across the Continent. 

Brexit is the most spectacular and tangible expression of this phenomenon — unforgettably symbolized by the inaccurate statement that the U.K. sends Brussels £350 million a week, emblazoned on Vote Leave’s bus. Not to mention the endless string of factually inaccurate and/or distorted stories on migration, terrorism and control of borders, according to a Brexit dossier compiled by InFacts. 

Sadly, this practice is not restricted to just the U.K. or a few other EU countries. Nor — as Barnier’s story demonstrates — has it remained purely the prerogative of anti-EU or Euroskeptic voices. Rather, it has consolidated into a bipartisan tradition within the national political systems of each of the 27 EU countries. 

Think of former Italian Prime Minister Matteo Renzi hiding his EU flag in an effort to gain popularity ahead of a self-imposed constitutional referendum, which turned out to be fatal for his political career. Or think of Dutch Prime Minister Mark Rutte’s strain of Euroskepticism during the latest election campaign, during which he lambasted the Union for interfering in national matters.  

By now, Euroskepticism is clearly embedded in the political DNA of the Hungarian and Polish ruling parties as well.  

EU-bashing has long been shaping the Union as we know it. And vice versa. 

Because behind the often-false Euroskeptic claims lies an inconvenient truth: After 70 years of unprecedented socioeconomic integration, the EU lacks a dedicated political system that is accountable to — and representative of — its over 445 million citizens. 

Instead, EU representatives — whether heads of state and government in the European Council or MEPs in the Parliament — are selected through 27 parallel national political processes. Not only are these processes national in nature (you can only vote for representatives from your own country), they remain mostly unintelligible to most EU citizens, even as they jointly define the European electoral game. 

Over the years, this opaqueness and lack of direct accountability has largely insulated the European political systems from scrutiny. Major political failures have taken place — think the Dieselgate scandal, the lack of a unified EU migration policy or the implementation of costly austerity measures — without anyone paying a political price.  

This lack of political intelligibility nurtures major political incoherence between the national and EU levels. It has allowed the European People’s Party —with the complicity of German Chancellor Angela Merkel — to benefit from the support of Hungarian Prime Minister Viktor Orbán despite his party, Fidesz, systematically breaching core EU values. It has also permitted the Spanish political party Ciudadanos — a member of the EU liberal family — to cozy up to the ultra-right party Vox at home, while siding with French President Emmanuel Macron in Europe.  

The good news is that Europe is growing its resistance to EU-bashing rhetoric, as actions that once would have gone unnoticed attract unexpected attention. Despite the absence of a genuine European political space, a growing number of Europeans — aided by the media — seem increasingly capable of calling their politicians out when they engage in cheap, factually inaccurate EU-bashing.  

Austrian Chancellor Sebastian Kurz was caught red-handed, for example, trying to shift the blame for vaccine shortages with Euroskeptic rhetoric. In the U.K., Prime Minister Boris Johnson was being prosecuted for misconduct in public office based on alleged lying to the public over his faulty bus statement — a world first.  

Returning to Barnier, the response to his remarks within his own country already suggests that his cheap talk might have backfired. How credible can he still be after nonchalantly disavowing his EU credentials for purely domestic electoral purposes?  

There’s other good news too. A proposed EU electoral law to govern the next 2024 EU Parliamentary election is set to Europeanize the EU electoral competition. If adopted and ratified by all 27 member countries, it will create a Pan-EU college and transnational electoral lists and require that all national parties disclose their party affiliations on the European level. 

As the Pan-EU electoral competition heats up and EU citizens continue their scrutiny of faulty anti-EU rhetoric, national politicians will have to realize that while EU-bashing might win them support at home, it just might cost them in the end.

Source : Politico EU More   

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