The EU energy market is in deep trouble. How should we respond?

The windfall tax on energy companies is a good start, but we must do more to restructure the energy market, including investing some of these profits into renewables
Andreas Schieder speaks at the 2022 State of the European Union debate | Photo: EC - Audiovisual Service

By Andreas Schieder

Andreas Schieder (AT, S&D) is a member of the Special Committee on foreign interference in all democratic processes in the European Union, including disinformation (INGE 2)

22 Sep 2022

Only this week, with the temperatures dropping in most of northern Europe after a long and hot summer, many people in the EU most likely resisted the urge to turn up the heating and decided to save energy and money instead – the debate over rising energy prices finally hit the majority of the public.

However, many citizens were already struggling to pay their bills over the past months. In particular, people with a low income were suffering not only from horrendous electricity bills, but also from rising prices for food and other necessities. Hence, the weekly visit to the supermarket turned into a challenge for many wallets and is splitting society and poisoning our democracy.

The weekly visit to the supermarket turned into a challenge for many wallets and is splitting society and poisoning our democracy

Hoping that these peoples’ needs and sorrows would not remain unaddressed, we were waiting last week for the annual State of the European Union address by European Commission President Ursula von der Leyen, and the announcement of measures to counter the energy crisis. While Social Democrats in the European Parliament and all over Europe have been calling for measures for a long time, many Member States, including Austria, were falling short in reacting quickly to shift the burden off the shoulders of EU citizens. This was hard to grasp for many of us, particularly because the solution seemed to be so obvious: introducing a price cap on household energy costs would stop the price explosion and deliver a solution that gets us through the winter.

While even the conservative and Green coalition government in Austria recently understood that this is the right thing to do, they forgot to provide us with a plan on how to finance this urgently needed intervention in the energy market. However, this is a crucial part of the answer: energy companies are profiting massively from the record high prices for electricity and gas, which is morally wrong. If we tax these windfall profits to cap prices and take this money to support citizens, we can rebalance the inequity which we face right now. Therefore, it was the right step for von der Leyen to promise a legal base for this.

Another important promise I took away from her speech was the reform of the energy market and the merit order system, which simply does not work anymore. The over liberalisation of the market made these vast price jumps possible, and there is no other solution than for national governments to interfere, coordinated on a European level. This hopefully will be a lesson learnt, for instance not to liberalise the railway sector as happened with the energy market.

However, there were some important parts and pieces missing in her address. For instance, it further has to be ensured that the revenues of the windfall taxes are also invested into renewable energies. This is crucial for our climate, but also to become less dependent on other countries, such as Russia. Furthermore, she missed introducing concrete measures for a full and overarching social response to the crisis – a task force to consult national governments will not be enough.

[President von der Leyen] missed introducing concrete measures for a full and overarching social response to the crisis

We need answers on how people will be supported besides measures tailored only to the energy market. Food and raw materials, and therefore most products, are becoming more expensive. How will EU citizens be supported in coping with this increased cost of living? The recent adoption of new rules regarding minimum wage in the EU is an adequate first step, but we need more balancing measures like this.

Listening to the reactions of some of my colleagues in the European Parliament to President von der Leyen’s speech, I was reminded of the importance of delivering real solutions to the problems we encounter these days and to tackle another problem: the fight against disinformation.

Populists in Europe are trying to blame the sanctions against Russia for the energy crisis. They try to turn society against the sanctions and create division in the EU. However, let them not divide us, and let us make sure that we get through this crisis together and in solidarity!

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