The European Commission will publish a package of measures on Wednesday seeking to offset surging energy prices, as countries grapple with the biggest shock to energy markets in history from the Iran war.
Here’s how the European Union plans to respond.
ELECTRICITY FIRST
Central to the EU proposals is a focus on reducing reliance on oil and gas, to cushion against fossil fuel supply disruptions and price spikes.
The Commission will set out plans to change EU tax rules, to ensure electricity is taxed below fossil fuels, according to a draft of the Commission’s plan, previously reported by Reuters.
That aims to incentivise consumers and companies to replace systems running on oil and gas with electric cars, heat pumps, and others that run on electricity.
The proposal will also make it easier for governments to cut energy-intensive industries’ electricity taxes to zero, to curb bills in the near term, according to the draft, which could still change before it is published.
And it will require countries to incentivise investments in smart grid technologies, to help bring more clean energy into the power mix.
Brussels will confirm the plans on Wednesday, and publish legal proposals in May. EU tax rules are politically difficult to change, because they require unanimous approval from all 27 member states.
Electricity taxes and levies in the EU are, on average, around twice as high as those for natural gas, according to analysis by think tank Strategic Perspectives.
The Commission will also propose an electrification target before summer, to push industries to switch from fossil fuels to electricity.
OIL AND GAS STOCKS
The EU will coordinate countries’ efforts to fill gas storage in the coming months – including the timing of purchases, according to the draft.
The aim is to avoid price spikes, which could be caused by companies rushing to buy at the same time.
Gas storage is currently 30% full, but the EU requires this to rise to 80% ahead of winter and companies have been slow to replenish stocks while prices are unusually high.
Brussels will also facilitate possible releases of oil stocks, by coordinating the timing and volumes in the EU, the draft said. International Energy Agency members – which include most EU countries – agreed last month to release 400 million barrels of oil from their reserves, in a bid to calm oil markets.
JET FUEL
The EU imports about 40% of its jet fuel, of which half comes via the Strait of Hormuz.
Brussels is preparing guidance on how to handle potential jet fuel shortages, which airports have warned could happen within weeks.
The guidance will cover issues such as airlines losing airport slots due to cancellations and the EU’s anti-tankering rule, designed to prevent planes from loading extra fuel in cheap locations, EU transport commissioner Apostolos Tzitzikostas said on Tuesday.
It will also clarify whether a fuel shortage can be considered exceptional enough for airlines to avoid paying compensation for cancellations.
The European Commission will monitor Europe’s refining capacity and introduce measures “to ensure that existing capacity is fully utilised”, its draft plan said.
‘IMMEDIATE RELIEF’
The draft proposals include a list of recommendations to provide “immediate relief”, although it will be up to individual governments to take them up.
They include delaying nuclear power plant closures, financial help to quickly install plug-in batteries and solar panels, and reducing the price of public transport.
STATE AID
Separately to the proposals coming on Wednesday, the EU is drawing up plans to let countries subsidise fuel and fertiliser prices more.
In a draft of these temporary state aid rules, seen by Reuters, the EU would let governments cover up to 50% of fuel or fertiliser price increases companies have paid since the Iran war began.
In a bid to avoid massive, untargeted subsidies straining public budgets, only a few sectors will be eligible – including farming, fishing and road transport.
The subsidies must be granted this year and can include grants, tax advantages, loans and guarantees.
The draft EU plan would also allow a higher intensity of aid to help industries pay their power bills.
