EU leader von der Leyen promises an overhaul of energy markets and a tax on fossil fuel profits

EU leader von der Leyen promises an overhaul of energy markets and a tax on fossil fuel profits

European Commission President Ursula von der Leyen said the time had come for the bloc to impose a price cap on the Russian gas pipeline.

John Thys | AFP | Getty Images

The European Union will launch a “deep and comprehensive reform” of the electricity market, European Commission President Ursula von der Leyen said on Wednesday.

In his annual State of the Union address, delivered to the European Parliament in the French city of Strasbourg, von der Leyen said the market was designed on the principle of the order of merit and was not suitable to its goal.

“Consumers should reap the benefits of low-cost renewables,” she said, “so we need to decouple gas price dominance from electricity price.”

Von der Leyen also said there had been a shift from the pipeline to increased use of liquefied natural gas, but the benchmark used in the gas market, TTF, had not adapted.

She said the commission would work to develop a more representative benchmark for exchanges that reflects this change, and would also ease liquidity pressures on energy suppliers by changing collateral rules and taking action. to limit intraday price volatility.

An energy supply and price crisis in Europe came to a head earlier this month as Russia halted gas flows to Europe indefinitely through the key Nord Stream 1 gas pipeline.

EU energy ministers met on Friday to discuss a five-point plan that includes a price cap on Russian gas, a one-off tax on fossil fuel companies’ profits, a limit on revenues renewable and nuclear companies, a mandatory target to reduce peak-hour energy consumption by 5%, and emergency lines of credit for power companies.

Russian President Vladimir Putin threatened to ignore existing contracts and completely cut off energy supplies to Europe after the plan was announced.

Discussing the tax and income cap plans, von der Leyen said that while profits were not necessarily a bad thing, “it is wrong to receive extraordinary record incomes and profits benefiting from war and on the backs of our consumers”.

“In these times, benefits must be shared and channeled to those who need it most.”

She said millions of households and businesses across the European Union were struggling with price hikes and fearful for the future.

The tax on fossil fuel profits would provide 140 billion euros ($139.8 billion) to be split among member states for energy bill support, she added.

Von der Leyen said the bloc’s priority must be to end its dependence on Russian gas, as imports from the country have already fallen from 40% last year to 9% now.

“We’ve agreed to join storage, we’re now at 84%, exceeding our goals,” she said.

But, she continued, “That will not be enough. We need to diversify away from Russia to reliable suppliers like the US, Norway, Algeria and others,” as well as invest more in renewables and LNG terminals.

“Putin will fail”

Ukrainian First Lady Olena Zelenska was present in Strasbourg as a guest of honor and was given a standing ovation by the parliamentarians.

Zelenska tweeted that she wanted to “personally thank” von der Leyen for his contribution to Ukraine’s bid for EU membership.

Von der Leyen, who gave the speech wearing the colors of the yellow and blue Ukrainian flag, made impassioned statements about the war, saying Ukraine faced the “face of evil” after Russia’s Feb. 24 invasion .

“There is a lot at stake, not only for Ukraine but for all of Europe and the world in general,” she said, paying tribute to the victims of the war, which she said was also a attack on Europe’s economy, energy, values ​​and future. .

“This is about autocracy versus democracy and I stand here with the belief that with the necessary courage and solidarity, Putin will fail and Ukraine and Europe will prevail.”

“Today courage has a name and that name is Ukraine. Courage has a face and that face is the face of the Ukrainian men and women who are resisting Russia’s aggression.”

Kyiv forces have reclaimed thousands of miles of Russian-occupied land in recent days, raising fears of Moscow’s next move. Russia launched heavy bombardments on the Kharkiv region on Saturday.

Von der Leyen also said the sanctions against Russia were “here to stay” and that it was “the time for resolution, not appeasement.”

Three-quarters of Russia’s banking sector had been cut off from international markets, nearly 1,000 international companies had left the country, its car production had fallen 75% from last year and its “industry is in tatters”, with its military stripping appliances. for parts due to a shortage of semiconductors, she noted.

She added that she wanted to extend “transparent access” to the EU’s single market to Ukraine and would travel to Kyiv on Wednesday to discuss this with Ukrainian President Volodymyr Zelenskyy.

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