EU ministers delay gas price cap deal for second time

EU energy ministers have delayed agreeing a gas price cap for a second time amid divisions that threaten to prevent other measures to ease the bloc’s energy crisis from being introduced.

After an eight-hour emergency meeting in Brussels on Tuesday, ministers from the 27 member states agreed the rough framework of a mechanism to limit gas prices if they reached “excessive” levels, but failed to reach a deal on specifics such as the level at which the cap would be triggered.

“As this is extremely sensitive and as some of the countries believe that if we are wrong with the mechanism it can cause a much bigger problem . . .[They] feel the need to have more of a discussion with experts,” said Jozef Sikela, the Czech energy minister who chaired the meeting.

Robert Habeck, Germany’s minister for economic affairs and climate action, said: “It makes sense to take a little bit more time, to take a step back and make sure we didn’t make any mistakes.”

But Riina Sikkut, Estonia’s economy and energy minister, said a price cap could not satisfy “all the differing wishes” of member states. Outstanding issues included whether the cap should only apply to Europe’s benchmark TTF index or all European gas trading hubs and whether the level should be “€200 [per megawatt hour] or more or less”, she added.

The introduction of a ceiling on gas prices has been the subject of some of the most intense and divisive discussions since the bloc started to introduce emergency legislation to ease an energy supply crisis prompted in February by Russia’s invasion of Ukraine.

Several countries, including Spain and Belgium, have been calling for a cap for more than eight months. But others, with a high reliance on gas such as Germany and Netherlands, have been strongly opposed to the idea, fearing it could cause much-needed gas to be redirected to higher-paying markets.

A proposal from the European Commission, set out last month, was for a cap that was triggered when gas prices for month-ahead contracts on the EU’s benchmark index hit €275 per megawatt hour for 10 days and were €58 per MWh above an average of global liquefied natural gas prices.

Several ministers branded a cap at that level “a joke” as it would not have kicked in even when prices hit the record highs that they did in August.

Concerns have been raised from several regulators and institutions including the European Central Bank, which last Friday warned a cap could still “in some circumstances, jeopardise financial stability in the euro area”.

But officials fear that without Russian pipeline gas supplies the EU could face an even tougher energy situation next year, prompting member states to compete with each other for scarce supplies and cause another spike in prices.

The International Energy Agency on Monday estimated the EU risked a shortfall of almost 30 billion cubic metres of gas, nearly as much as the annual consumption of the Netherlands, next year. Increased demand from China as it emerges from Covid-19 lockdowns was also a risk, the agency said.

A senior German government official said the IEA report showed “the tense situation on energy markets and the risk of shortages in 2023. We have to take this really seriously. And an artificial price cap that is constructed in a careless way could lead to false incentives.”

The level of the cap will be discussed at a further meeting of ministers on December 19.

Additional reporting by Guy Chazan in Berlin