Von der Leyen’s State of the Union details EU’s emergency energy measures
The commission’s proposal, which still needs to be approved by member states, says the EU should tax the profits of non-gas electricity producers when they sell above a certain price and obliges fuel companies fossil fuels to pay a “solidarity contribution” on their 2022 profits. Von der Leyen said the measures could provide a cushion of about $140 billion for consumers.
Europe considers drastic measures to control prices as Russia’s energy war heats up
The proposal also calls for mandatory targets of at least 5% reduction in gross electricity consumption during peak hours, covering at least 10% of the hours in each month when prices are expected to be highest.
Von der Leyen said on Wednesday that the escalating energy war with Russia would test the EU in the coming months. “It’s not just a war started by Russia against Ukraine,” she said. “It’s a war on our energy, a war on our economy, a war on our values and a war on our future.”
She said Russia was “actively manipulating” the bloc’s energy market to the point that it no longer worked, but Europe was fighting back. “I stand here with the conviction that with courage and solidarity, [Russian President Vladimir] Putin will fail and Europe will win,” she said.
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The annual address comes more than six months after Russia launched its full-scale invasion of Ukraine, shaking up Europe’s post-Cold War security architecture and energy strategy. The 27-member bloc moved with unusual speed and unity, uniting to hit the Kremlin with unprecedented sanctions and offering financial and military support to Ukraine.
On Wednesday, von der Leyen tried to allay fears that EU solidarity would unravel or that sanctions would be withdrawn. “I want to be very clear, the sanctions are here to stay,” she said. “Now is the time for us to show determination, not appeasement.”
But European Union efforts to strike at the Russian war machine have accelerated Europe’s energy and cost-of-living crises, sending the price of electricity, as well as food and other commodities, skyrocketing. essential. Although von der Leyen’s speech barely mentioned the food crisis, there are growing fears that Europe’s economic woes could deepen social and economic pain elsewhere. The European Central Bank raised interest rates last week for the second time this year in a bid to calm inflation without pushing the economy over the edge.
The White House is monitoring the situation closely. President Biden’s aides have been reviewing their efforts to export liquefied natural gas to Europe, to see if there’s an additional way for U.S. producers to help. During a visit to Brussels last week, Secretary of State Antony Blinken said the United States will “not leave our European friends out in the cold.”
Since February, the European Union has taken steps to wean itself off Russian energy in the name of limiting Russian revenues and loosening the Kremlin’s grip on Europe. To some extent, the moves seem to work.
The Russian pipeline now accounts for just 9% of EU gas imports, for example, not the 40% it did at the start of the year. The EU hit its target last week to get petrol stores to over 80% capacity well before the weather turns November. In the short term, however, prices remain high and national governments are paying hundreds of billions to try to keep people afloat.
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Some people have questioned the wisdom of the windfall tax on energy companies, fearing, for example, that the tax could discourage companies from making new investments at a critical time. Others worry that the price cap will increase demand, exacerbating the root problem: low supply.
EU officials have justified the levies by arguing, in essence, that exceptional circumstances require an exceptional response.
“These unprecedented measures are a necessary response to the energy supply shortages and high energy prices affecting Europe,” European Commission Executive Vice-President Frans Timmermans said in a statement on Wednesday. “A cap on outsized revenue will bring solidarity from energy companies with abnormally high profits to their struggling customers.”
A measure that has been floated by the commission in recent weeks – a price cap on Russian gas – has proven divisive among member states and was not included in Wednesday’s proposal. EU officials said they would continue to explore ways to lower gas prices.
Energy ministers from EU member states will meet on September 30 to discuss next steps.