Energy prices have taken off this year as economies bounce back from the effects of the coronavirus pandemic

Brussels (AFP) - The EU on Wednesday presented a “toolbox” of measures to mitigate an energy crunch that threatens to send Europeans’ power bills soaring.

The European Commission has been under pressure to act on the looming crisis, even though individual EU governments are more directly responsible for their energy sources and taxation.

Consumers’ “concern is understandable, justified,” said EU energy commissioner Kadri Simson as she unveiled the proposals.

“Winter is coming and for many, electricity bills are higher than they have been for a decade. We have seen gas price surge across the world driven mostly by demand in Asia.”

The main reason for the energy prices surge is that economies are bouncing back strongly from the effects of the coronavirus pandemic.

Wholesale natural gas prices, the lead indicator for overall energy prices in Europe, have more than tripled this year. Oil and coal prices have also jumped.

Some EU officials accuse Russia, source of most of the imported gas into the bloc, of “blackmail” by limiting stop-gap supplies to try to force Germany to activate the newly completed Nord Stream 2 pipeline across the Baltic, bypassing Ukraine.

But Moscow argues it is a “reliable partner” and says new contracts would need to be agreed for increases in natural gas deliveries to Europe.

And Russian President Vladimir Putin told an energy forum in Moscow that it was “very important” to “suggest a long-term mechanism to stabilise the energy market” in what he called a “difficult situation.”

The energy issue will headline an EU leaders’ summit next week.

The list of options presented Wednesday to immediately counter the energy price hikes include giving emergency payments – perhaps in the form of energy vouchers – to poorer households.

Consumers should also be allowed to defer paying bills, and taxes and levies that can account to more than a third of the cost of those bills could be reduced or suspended, the Commission said.

It stressed, however, that these proposals must be “temporary” and “targeted”.

Medium-term proposals also presented were vaguer.

They focused on boosting investment in renewable energy sources and pan-European grids – measures already charted as the EU re-gears itself to become carbon-neutral by 2050.

- Green transition -

Simson strongly pushed back at criticism by some in the EU – most notably Hungary – that the energy price surge was the result of higher costs related to that green transition.

“We are not facing an energy price surge because of our climate policy, or because renewable energy is expensive. We are facing it because the fossil fuel prices are spiking,” she said.

She also said that revenues from the EU’s carbon-trading scheme have increased since last year’s slowdown and were available to finance the short-term mitigations on the table.

“We call on the member states use that additional income to address the social impact of energy price surge where needed,” she said.

A suggestion floated by France – which gets most of its power from nuclear stations – to sever a price link between gas and electricity did not feature in the Commission’s list of proposals.

Another one, from Spain, on EU countries making joint gas purchases got only a mention that “the potential benefits and design” of such an idea should be explored.

But other countries - including Germany and the Netherlands - have warned against “extreme measures” in the face of a situation they see as temporary.

Analysts at the Bruegel think tank said that, for the short-term energy problem, the EU cannot do much to boost supply.

“The only thing Europe can quickly do to prevent a potentially difficult winter is to actively promote energy conservation in both the residential and industrial sectors,” said Bruegel senior fellows Simone Tagliapietra and Georg Zachmann in a post on the institution’s site.

For households, that would include “switching off lights, closing curtains, and taking shorter hot showers” while manufacturers could pare back production or consider temporary closures, they said.