A woman on a bicycle walks past the power station in Neurath, Germany.
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LONDON – The European Union could struggle to push forward on its green agenda as gas prices soar across the bloc, according to experts who warn of slowing investment in the sector.
The European Commission, the EU’s executive body, has pledged to become carbon neutral by 2050, presenting a concrete plan to reduce greenhouse gas emissions by at least 55% compared to 1990 levels by the end of this decade.
However, these ambitions could be undermined as a shortage of natural gas on the continent drives up prices. The price of gas for the first month at the Dutch hub TTF, a European benchmark, has increased by more than 250% since the start of the year. It was trading at around 74 euros ($ 87) per megawatt hour on Tuesday – just short of its record of 79 euros reached last week.
The recent peak is already having a tangible impact. Spain, for example, has announced emergency measures to limit the profits energy companies can derive from alternatives to gas, including renewables. The government also hopes to cap what consumers pay for their electricity.
“Soaring energy prices have hit economies across Europe, and if Madrid’s actions are emulated elsewhere as governments prioritize cheap energy over the green transition, credibility of the EU in promoting global climate action could take a hit, “Henning Gloystein, energy director at the consultancy firm. company Eurasia Group, said in a note Friday.
Spain is not the only country to cap energy price increases, with France and Greece making similar moves. But the plan in Spain has been the subject of some criticism.
Iberdrola, a Spanish energy company focused on renewable energy, said the move “would undermine investor confidence in the country” at a time when the country needs private money to achieve its climate ambitions.
âThe risk to climate policy making may lie primarily in a loss of credibility ahead of the COP26 global climate talks in Glasgow later this year,â Gloystein told CNBC via email.
“If the rich countries of the EU subsidize household energy which is partly fueled by fossil fuels, then the EU can hardly tell the poorest countries to stop subsidizing the consumption of household fuel supplied by the fossil fuels, âadded Gloystein.
Meanwhile, Jacob Kirkegaard, senior researcher at the German Marshall Fund of the United States think tank, said he wasn’t too worried at this point, but that the current energy crisis “makes it even more important that government Spanish finds other sources of funding. . “
âYou can’t stop funding wind turbines for people’s bills,â he said, adding that countries should not relax their investments in greener energy.
There is, however, a larger problem: Some European leaders and lawmakers have blamed the EU for rising energy prices.
Polish Prime Minister Mateusz Morawiecki, for example, said earlier this month that “electricity prices in Poland are tied to EU climate policies,” according to Politico.
When asked if comments like these could hurt the EU’s green ambitions, Kirkegaard said: “There is absolutely that risk because the Polish government clearly wants to extract more money from the EU for the green transition. “
Steam rises from the cooling towers of the Turow coal-fired power plant, operated by PGE SA, in Bogatynia, Poland.
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Poland said on Monday it would keep a working coal mine even though the European Court of Justice ruled it should be shut down. Under the same decision, Krakow must pay a fine of 500,000 euros for each day it keeps the mine open.
EU climate chief Frans Timmermans insisted the price increases are not the bloc’s fault. “Only about a fifth of the price increase can be attributed to rising CO2 prices,” he told the European Parliament earlier this month. “The others are simply shortages in the market.”
“If we had had the green deal five years earlier, we wouldn’t be in this position because then we would be less dependent on fossil fuels and natural gas,” he added.
Kirkegaard said “it is too early to say” whether the price hike will jeopardize the EU’s green ambitions. The biggest risk, in his view, is whether public support for a greener economy wanes because it is perceived to have an impact on their bills.
The European Commission announced earlier this summer that there will be special funds allocated to support the most vulnerable parts of the population in this green transition. The question is whether this will suffice.
“It must be a just green transition. That is why we have proposed a new Social Climate Fund to fight the energy poverty, which already affects 34 million Europeans”, said Ursula von der Leyen, chair of the committee. , during a speech last week.