Thursday, 1 December, 2022
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EU warned over gas price cap

The European Commission has cautioned that an EU price cap on natural gas could result in increased outflows of cheaper energy to countries not part of the scheme.

The measure could reportedly cause an increase in gas demand by up to 9 billion cubic meters. This would result in cheaper EU-produced electricity flowing to non-EU countries that import power from the bloc but do not have the price cap, such as the UK and Switzerland. In the document, members states are urged to come up with solutions to prevent this scenario, reports RT.

According to a source at the Commission who spoke to Bloomberg, one way to do that would be for the EU to raise export prices for power above rates within the bloc. However, such a move is currently prohibited by a number of international agreements.

The document also warned that the benefits from the price cap would not be evenly spread among EU members. France as a net importer of gas-fueled power would be the biggest beneficiary, while Germany, the Netherlands, and Italy, which produce much of the bloc’s gas-fueled electricity, would face the highest costs to fund the mechanism.

EU countries have been working on a mechanism to limit the price of natural gas in response to an unprecedented energy crisis resulting from the reduction in imports from Russia, formerly the bloc’s biggest supplier. Over the past year Russia has reportedly gone from providing 40% of the EU’s gas imports to just 9%.

Last week, the European Commission issued a number of proposals aimed at saving gas and lowering energy prices. However, EU leaders failed to agree on them at a summit in Brussels later in the week, as not all bloc members are supportive of a price cap. EU energy ministers are expected to meet to discuss the issue on Tuesday.

Russia, meanwhile, has threatened to stop all gas flows to the EU if a price ceiling is implemented. According to the CEO of state-owned energy giant Gazprom, Alexei Miller, such a measure would be a breach of contract on the part of EU buyers. Although Russian gas deliveries to the EU via the Nord Stream and Yamal-Europe pipelines have been halted, Russian gas is still being delivered to certain European buyers through a transit line through Ukraine and the TurkStream pipeline through Türkiye.