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What the energy crisis means for Europe’s green ambitions


A woman on the bicycle rides pass the power station in Neurath, Germany.

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LONDON — The European Union could struggle to advance its green agenda as gas prices soar across the bloc, according to experts who warn against slowing down investment into the sector.

European Commission (the executive arm of EU) has declared that it will become carbon neutral in 2050. They have presented a detailed plan to cut greenhouse gas emissions at the minimum of 55% of 1990 levels.

However, these ambitions could be hit as a natural gas shortage on the continent drives prices higher. Since the beginning of this year, the front-month gasoline price at the Dutch TTF Hub, an European benchmark, has increased more than 250%. It traded at about 74 euros ($87) a megawatt-hour on Tuesday — just shy of its record high of 79 euros it hit last week.

It is impossible to stop funding windmills for the people’s bills.

Jacob Kirkegaard

senior fellow, German Marshall Fund of the United States

The recent spike is already having a tangible impact. Spain announced, for example emergency measures to restrict the profit energy companies can make by using renewables and gas alternatives. It is also aiming to limit the price consumers pay for electricity.

Henning Gloystein (director of energy at Eurasia Group), stated in a Friday note that rising energy prices had impacted European economies. He also said that if Madrid’s policies are copied elsewhere, as countries prioritize cheap energy over green transition, then the EU’s credibility to advance global climate change action may suffer.

France and Greece are also making similar efforts to limit energy price rises. However, some have criticized the Spanish plan.

IberdrolaThe move by, an energy company in Spain that focuses on renewables, “would undermine investor trust in the country,” at a moment when the nation requires private funds to reach its climate goals.

If we’d had the green deal five more years before, this would have been a different situation.

Frans Timmermans

EU Climate Chief

“The risk to climate policymaking lies perhaps mostly in a loss of credibility ahead of the global COP26 climate talks in Glasgow later this year,” Gloystein told CNBC via email.

Gloystein stated that “if rich countries of the EU subsidize energy for households that’s in part provided by fossil fuels, then they can’t tell poorer nations to stop subsidizing household fuel use supplied by fossilfuels.”

Jacob Kirkegaard (senior fellow at the German Marshall Fund, a think tank in the United States), said that while he doesn’t feel too worried about this, the continuing energy crisis makes it more crucial that Spain finds alternative sources of funding.

He stated that “you can’t stop financing windsmills for peoples’ bills”, but added that there is no reason to reduce countries’ investments in renewable energy.

What is the fault of the EU?

However, there is more to the problem: European lawmakers and leaders have blamed EU for energy price rises.

According to Politico, Mateusz Morawiecki (Polish Prime Minister) stated earlier in the month that Polish power prices were tied to EU climate policies.

Kirkegaard answered that comments like this could harm EU’s green ambitions. He said, “There is absolutely that risk. Because clearly the Polish government wants to get more money out of the EU for green transition.”

PGE SA operates the Turow power plant. In Bogatynia in Poland, vapour rises from its cooling towers.

Getty Images Poland claimed Monday that it will continue to operate a coal mine despite the European Court of Justice ruling it must be closed.| Bloomberg | Getty Images

Poland said Monday that it will keep a coal mine running, even though the European Court of Justice ruled it should be shut down. The same ruling also states that Krakow must pay a fine of 500,000 euros for each day it maintains the mine open.

Frans Timmermans is the EU’s climate chief and insists the increase in prices are not due to the bloc. A mere 5% of price rise can be blamed on CO2 prices rising, he said to the European Parliament this month. The other factors are about market shortages.

The green deal would have been signed five years before we are in the current situation. This would mean that we wouldn’t be dependent on oil and gas as much.

‘Fair green transition’

Kirkegaard said that “it is too early to tell” if the price rises are going to jeopardize the EU’s green ambitions. He believes that the biggest danger is whether people are less supportive of a greener economy because they perceive it as having an impact on their monthly bills.

This summer, the European Commission stated that special funds would be allocated for the support of those most in need during this transition to greener economies. But it is unclear if that amount will be sufficient.

It must be an equitable green transition. Ursula von der Leyen was the president of the commission and spoke at last week’s speech.