By Kate Abnett BRUSSELS, March 16 (Reuters) - European Union energy ministers will meet to weigh up options to curb energy costs on Monday, as officials draft emergency plans to temper the impact of
EU plans emergency measures to curb energy costs as Iran war hits markets
EU Response to Surging Energy Prices Amid Iran Conflict
By Kate Abnett and Alexander Chituc
BRUSSELS, March 16 (Reuters) - The European Union will take steps to ease the impact of surging energy prices caused by the U.S.-Israeli war against Iran, European Commission President von der Leyen said on Monday, while stopping short of major market interventions such as capping gas prices.
Commission President’s Letter and Proposed Measures
In a letter to EU leaders before a Brussels summit on Thursday, she laid out plans focused on making more carbon-emissions permits available in the bloc's market and providing more financial aid to industries. The proposal omitted more radical measures called for by a handful of governments such as a redesign of the EU's electricity market.
Europe's heavy reliance on imported fuels means it is highly exposed to global price swings, and governments want to avoid a repeat of Europe's 2022 energy crunch, when prices hit record highs after Russia cut gas supplies.
The EU imports most of its oil and gas from the U.S., Norway and other suppliers that are not directly affected by Middle East supply cuts.
Von der Leyen’s Assessment of the Situation
"At present, the physical security of supply of the European Union is assured. But the increase of fossil fuel prices is already weighing on our economy," von der Leyen said.
She said the EU's bill for oil and gas imports had increased by 6 billion euros during the Iran conflict, which began on February 28.
Secure Supplies, High Prices
Support for Industries and Market Adjustments
Seeking to lower total energy costs for end users, Von der Leyen said the EU would allow more state aid to industries when high carbon prices inflate power bills.
Brussels will also propose adjustments to a reserve regulating the supply of emissions permits in the EU carbon market to help "keep prices in check in the short term", she said in the letter, seen by Reuters.
Changes to Carbon Permits and Decarbonisation Plans
Other measures include changes in rules on free carbon permits, the letter said. Some industries have urged Brussels not to restrict these permits as quickly as planned under climate policies.
Von der Leyen also suggested Brussels will moderate the planned tightening of permit supply over time in the emissions trading system. An upcoming proposal to revise the ETS will "set out a more realistic decarbonisation trajectory beyond 2030," the letter said.
Pressure on Governments
Rising Gas Prices and Policy Debates
European benchmark gas prices have increased by more than 50% since the Iran war began last month.
The EU proposals walk a tightrope between calls from governments including Italy to suspend the EU carbon market - which is the EU's main tool for reducing planet-heating CO2 emissions - to curb energy bills, and those like Sweden and the Netherlands who oppose weakening it.
"The market and the investors need stability, so we cannot from one day to another suspend the rules," Poland's energy Secretary of State Wojciech Wrochna said at an EU energy ministers' meeting on Monday.
Concerns Over National Aid and Economic Inequality
Some officials and analysts have expressed doubt that the EU can find quick fixes, and warned that more national aid would risk widening inequalities between wealthy and poorer EU countries.
Of the more than 500 billion euros ($571 billion) EU governments spent on support measures during the 2022 energy crisis, 158 billion euros came from Europe's biggest economy, Germany, according to the think-tank Bruegel.
($1 = 0.8760 euros)
(Reporting by Kate Abnett and Alexander Chituc; additional reporting by Charlotte Van Campenhout, Sudip Kar-Gupta, Susanna Twidale, Miranda Murray, Makini Brice; Editing by Elaine Hardcastle, Barbara Lewis and Cynthia Osterman)
