Germany cedes ground in debate over gas price cap
The European Commission has been given the greenlight from EU member states to draft a proposal for a temporary cap on wholesale gas prices, following late-night talks on October 20.
The breakthrough was made after Germany dropped its opposition. Berlin has for months criticised the measure, warning that capping prices would only worsen Europe’s gas supply crunch, by incentivising LNG suppliers to deliver their output to other, higher-priced markets. The European Council has now asked the commission to devise a “temporary dynamic price corridor on natural gas transactions to immediately limit episodes of excessive gas prices.” However, Germany could well veto the final proposal.
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Another price cap proposal, dubbed the Iberian mechanism, will also be considered by the commission on a “cost and benefit analysis” basis. This would involve capping the price of gas used as fuel for electricity generation. But concerns linger that this could encourage gas power plants to boost output, exacerbating the crisis.
The result was broadly in line with proposals by the commission on October 18 for a “dynamic price limit” on gas traded within the EU, joint purchasing for 15% of EU gas storage volumes, and a solidarity mechanism requiring member states to share their supply in the event of an emergency.
“We do now have a very good and solid roadmap to keep on working on the topic of energy prices,” commission president Ursula von der Leyen said following the summit.
The commission now has two or three weeks to draw up the mechanisms to be implemented.