The war in Iran has triggered the European Union’s second major energy crisis in just four years. This has highlighted a key vulnerability of the bloc—its dependence on imported fuel—which has dealt a severe blow to the Union’s finances and the competitiveness of its businesses. In just two months of the conflict, the EU’s energy import costs rose by €27 billion. Consequently, authorities are proposing measures to strengthen the bloc’s energy resilience.
European Commission President Ursula von der Leyen outlined these measures at a European Parliament session.
The saving grace of renewables
The crisis has hit countries the least where low-carbon energy sources account for a larger share of the energy mix. The President of the European Commission cited the example of Sweden, where nearly all energy comes from renewables and nuclear power. According to her, when gas prices rise by €1 per MWh, energy in Sweden becomes only €0.04 more expensive.
“We must reduce our excessive dependence on imported fossil fuels and increase the supply of our own, affordable and clean energy-from renewables to nuclear, provided full technological neutrality is maintained,” emphasized Ursula von der Leyen.
Universal solutions do not work
EU countries have too diverse an energy balance for any single solution to achieve the same results everywhere. Therefore, the European Commission suggests combining several measures.
Coordination. According to von der Leyen, at the start of the energy crisis, countries began to compete with each other to purchase gas. Therefore, now the European Commission proposes to strengthen coordination in filling national storage facilities and building up fuel reserves, including aviation fuel.
Protection of Consumers and Businesses. The previous crisis revealed unfairness in supporting vulnerable companies and households. They received only 25% of emergency aid, while another €350 billion was spent on non-targeted measures.
“This had a huge impact on the finances of member states and also undermined efforts to protect those who needed it most. Actions should be targeted only at the most vulnerable households and sectors of industry-and should avoid increasing demand for gas and oil,” – emphasized the President of the European Commission.
Electrification with an Emphasis on RES. If in 2022 gas set energy prices 70% of the time, by 2026 this will be only 30%. This helped avoid dramatic price spikes as in the previous crisis; however, electrification remains insufficient. Electricity accounts for less than 25% of energy consumption in the EU. Therefore, €300 billion has already been earmarked in the EU budget for energy, of which €95 billion is already available.
“Let's use these funds to transition to electricity-not only in transport, but also in industry and heating. This is not just a matter of accessibility and competitiveness, but also of economic security,” emphasized von der Leyen.
In her speech, the President of the European Commission also spoke about a new package of resources to replenish the budget. These funds are intended to strengthen financing for measures aimed at boosting European competitiveness, defense, and security.
As previously reported by EcoPolitic, two of the five new sources are 75% of the funds from the Carbon Border Adjustment Mechanism (CBAM) and 30% from emissions trading within the EU ETS. It should be noted that the former is essentially a carbon tariff paid by importers for CO2 emissions generated during the production of goods, while the latter is an internal carbon tax paid by EU producers when purchasing emission allowances. In other words, both are environmental payments, but in her speech, the President of the European Commission does not mention the climate priorities for which the funds collected through CBAM and ETS will be used.
