How can Europe solve the “gas emergency”?

International Business News – As summer draws to a close, stockpiling natural gas for the winter has become an important issue for many European countries. However, the EU member states’ natural gas reserve rates vary widely, and the ways to alleviate rising energy prices are not the same. According to AFP, a special meeting of EU energy ministers was held recently in Brussels, Belgium, where the energy ministers of the 27 EU member states agreed to formulate relevant emergency measures as soon as possible, but there are major differences in the views of the EU member states on the European Commission’s proposal to set a price ceiling for Russian gas exports.

Energy woes grip EU

Reuters recently reported that the proposal to cap Russian gas prices did not win broad support from EU countries at a meeting of EU energy ministers, according to a summary of the meeting released by the Czech presidency of the EU. In response to high energy prices, the ministers asked the European Commission to prepare other emergency measures, such as imposing a broader cap on gas prices, rather than targeting Russia specifically.

It is reported that the proposed emergency measures to be introduced by the European Commission include: coordinating EU member states to reduce electricity demand; setting a cap on the revenues of low-cost power generation companies and taxing the profits of fossil fuel power generation companies; and developing emergency and temporary intervention measures, including consideration of a price cap on natural gas.

Since the outbreak of the Russia-Ukraine conflict, the tough sanctions imposed on Russia by the United States and the European Union have triggered a series of chain reactions. As a result of the drastic cut in the flow of Russian gas to Europe and the extreme weather in Europe, gas and electricity prices in Europe have hit record highs, energy supply is tight, inflation is severe, and the cost of living has increased significantly.

On Sept. 2, Gazprom announced that the Nord Stream-1 gas pipeline could not resume gas supply on Sept. 3 as scheduled due to a leak discovered during maintenance work. Reuters reported that gas prices in Europe jumped nearly 30 percent after Russia announced that Nord Stream-1 would be shut down indefinitely, raising renewed concerns about gas supply shortages and rationing in the EU this winter. AFP reported that before the Russia-Ukraine conflict, 40 percent of the EU’s gas supply came from Russia. Germany, the EU’s largest economy, which is highly dependent on Russian gas, is now trying to find ways to provide heating and electricity to homes and factories across the country.

Differences in interests affect consensus

Previously, the EU adopted an agreement requiring that EU member states’ gas reserves reach at least 80 percent of total capacity by Nov. 1 of this year. on Aug. 30, European Commission President von der Leyen said that the EU’s gas reserves had reached 80.4 percent and were advancing at the normal rate of reserves in previous years. This means that the EU has achieved its gas storage target for this current phase ahead of schedule and beyond. At the same time, the situation varies across EU member states, with Italy and Hungary, among others, consistently storing gas at a rate below the past average.

“The EU member states have different degrees of dependence on foreign energy, especially on Russia. Central and Eastern European countries such as Hungary and the Czech Republic are highly dependent on Russia’s energy; EU member states near the Mediterranean mainly import energy from the Middle East, and have a high degree of dependence on Russian energy. The dependence degree of Germany on Russian natural gas is relatively low; Germany’s high dependence on Russian natural gas is affected by factors such as historical reasons and the division of labor resources.” Wang Yiwei, director of the European Union Research Center of Renmin University of China, analyzed in an interview with this reporter.

“At the special meeting of EU energy ministers, countries failed to reach a consensus on the Russian issue, which reflects the differences in the interests of EU member states and the EU’s inability to fundamentally solve the problem of energy dependence on Russia.” Wang Yiwei analyzed that since the conflict between Russia and Ukraine, the EU has Playing the “energy card” with the United States in an attempt to bring down the Russian economy and make Russia capitulate, but the actual effect did not meet expectations, but instead made the EU face a difficult winter. On the one hand, the EU is now trying to decouple from Russian energy, which has greatly increased the production costs of European companies, affected the international competitiveness of German manufacturing, and hindered the EU’s re-industrialization process. On the other hand, this move disrupted the pace of energy transformation in Europe. Developed countries in Europe such as Germany have begun to restart traditional energy sources such as coal power and nuclear power.

As the “locomotive” of the EU, Germany has fallen into economic difficulties due to the shortage of energy. Data from Germany’s Federal Statistics Office has repeatedly shown in recent months that soaring energy prices are the main driver of rising inflation in Germany. According to a recent survey of economists by Reuters, the German economy may shrink for three consecutive quarters starting this quarter. A recession in Germany would have knock-on effects across Europe.

It is difficult to determine a safe winter

The special meeting of EU energy ministers agreed on a common direction for emergency measures, Czech Industry and Trade Minister Josef Sikla, who holds the rotating EU presidency, told a news conference. The European Commission will make strong and practical recommendations within a few days, doing everything it can to help people and businesses facing high energy prices. The European Commission is expected to publish details of the proposed emergency measures next week for discussion by member state governments. EU energy ministers will meet again to negotiate and approve the final version.

In response to energy shortages and rising prices, EU member states mainly implement subsidy policies. For example, Germany proposed a total of 65 billion euros in energy subsidies, including public transport subsidies and special subsidies for individuals, to ease the need for low-income families, students, and small and medium-sized enterprises. Economic pressures ahead of rising energy. France, Italy and other EU countries have also introduced corresponding subsidy policies.

“At present, the EU is trying to reduce the impact on Russia’s energy dependence through comprehensive measures to increase revenue and reduce expenditure.” Wang Yiwei analyzed that open source mainly imports energy from Nigeria, Qatar, Israel and other African and Middle Eastern countries, and increases the import of LNG from the United States. Improve the decentralization and diversification of energy import sources, and vigorously develop and utilize new energy sources such as wind power. Throttling is mainly to reduce energy waste and improve energy efficiency through smart grids and smart energy.

Dong Yifan, a scholar at the Institute of European Studies at the China Institute of Contemporary International Relations, said in an interview with this reporter that there is still great uncertainty about whether the EU can survive the winter safely. On the one hand, although the EU has set targets such as a 15% reduction in consumption and a natural gas reserve ratio of 80%, these amounts are based on ideal conditions. In the volatility of the international natural gas market, there is great uncertainty as to whether this goal can be achieved. At the same time, the current overall energy system of the EU has certain instability. In the case of insufficient renewable energy power generation, the EU must supplement it with traditional energy sources, and the consumption of natural gas is likely to exceed the original expectations. On the other hand, even if the natural gas reserve rate is “up to standard”, it does not mean that it is safe. Although Germany stated that its natural gas reserve rate has reached 85%, which is higher than the EU average, its energy shortage situation is still severe. High energy prices have had a serious impact on German industrial production, and many companies have reduced production.

Jonathan Stern, director of the Oxford Institute for Energy Research, said: “The EU as a whole doesn’t have enough gas, and despite Germany’s 85% storage capacity, there is a can you get gas from where it’s stored to where it’s needed. The question of where to go. For example, France cannot supply gas to Germany despite having an LNG terminal.”

“At present, the EU focuses on ensuring the supply of energy on the issue of energy shortages. There are limited measures that can be implemented to stabilize prices, and there is no strong grip. As the EU mainly focuses on adjusting the balance of supply and demand within the EU, it has not effectively solved the problems caused by energy shortages. Inflation and economic and people’s livelihood problems, it is difficult to find effective solutions in the short term. With the continuous increase of imported inflation in the EU, the operating pressure of enterprises and the living burden of the people may further increase, and the negative emotions and protests of the people may spread. It will have an impact on the EU economy and people’s livelihood.” Dong Yifan said.