Dependence on fossil gas cause soaring energy bills

As the world recovers from the pandemic, energy prices in the European Union have surged to record-high levels and the only way forward is renewables.

The energy crisis is driven by increased global demand as the world recovers from Covid-19 and lower-than-expected natural gas deliveries. According to the European Commission, wholesale electricity prices have increased by 200% compared to the 2019 average but are expected to fall in the spring. The majority of EU countries depend on gas-fired power stations to meet electricity demand, and about 40% of that gas comes from Russia, according to Eurostat. This is a clear wake-up call that the EU needs to wean itself off its fossil fuel dependency and accelerate the transition to clean energy.  

A new report produced by the NGO Global Witness shows that European gas transmission operators and their parent companies made €4 billion in profits in the first six months of 2021, even as the energy crisis was beginning to bite. “At a time when many Europeans are being forced to choose between heating and eating, Europe’s powerful gas companies are enjoying huge profits,” said Jonathan Noronha-Gant, Senior Gas Campaigner at Global Witness. He adds “As these companies pass massive rises in the price of gas onto some of the most vulnerable people, it leaves a sour taste that those same companies continue to enjoy healthy profits”.¹

At the end of October the Commission published an annex to its State of the Energy Union Report which showed that fossil fuel subsidies amounted to 56 billion euro in 2019. Fossil fuel subsidies have increased, it found, by 2 billion euro since 2015. The annex states that “EU and its member states have to do more to reduce fossil fuel subsidies”. Rebecca Humphries, at the WWF, calls for action in light of the energy price increase “More gas in the EU would mean more pollution, more costs, more risks”.²

Poland and Hungary have blamed Europe’s climate policies for the rise in energy prices and called on the Commission to suspend the Emissions Trading Scheme (ETS). Viktor Orban, the Hungarian Prime Minister stated: “The price will go up every day if this stupid plan is not withdrawn”.³ Even though there has been an increase in European carbon prices, these were not the main culprit for soaring energy costs. Ember, an independent climate and energy think-tank, shows that the surge in European power prices is predominantly being driven by soaring fossil gas costs.

A related report was published alongside the Energy Union report focusing on the EU carbon market. The carbon market (EU ETS) covers sectors responsible for 36% of the bloc’s greenhouse gas emissions. It was stated that this “contributed significantly” to emission reductions, with emissions from power generation and energy-intensive industrial sectors falling by 43% since the launch of the cap and trade system in 2005. Data set out in a working document relating to the carbon market report show that EU member states (including the UK) received 19.2 billion euro in auction revenues from the ETS in 2020, with cumulative revenues from the system surpassing 68 billion euro. Some 72% of the 2020 revenues were spent on “climate and energy purposes”, the Commission explained. In addition, investments in renewables increased 48% in 2020, according to the report.

The Commission has introduces a “toolbox” of short-term measures available to EU countries. It relies mainly on temporarily cutting national energy taxes that typically account for around a third of power bills. However, the solution to these price spikes in the longer run is a faster rollout of renewable energies, such as wind and solar, as well as improved energy efficiency. The Commission Executive Vice-President Frans Timmermans stated “The irony is, had we had the green deal five years earlier, we would not be in this position, because then we would have less dependency on fossil fuels and on natural gas. We have seen along this energy price crisis, along the way, that the prices for renewables have stayed low and stable”.⁴

Emilia Samuelsson

¹ Gas companies in Europe made €4 billion from energy crunch: report , Euractive, 29 October 2021, https://www.euractiv.com/section/energy/news/gas-companies-in-europe-mad...

² Fossil fuel subsidies ‘must continue to fall’ amid energy crisis, say OECD and IEA, ENDS Europe, 3 November, https://www.endseurope.com/article/1732268/fossil-fuel-subsidies-must-co...

³ EU summit to pass on energy ‘hot potato’ to ministers, Euractive, 21 October 2021, https://www.euractiv.com/section/climate-environment/news/eu-summit-to-p...

⁴ Timmermans: Fossil fuel dependency, not ETS to blame for rising energy costs, ENDS Europe, 14 September 2021, https://www.endseurope.com/article/1727335/timmermans-fossil-fuel-depend...