EU leaders met at a summit in Prague on October 7e to discuss capping gas prices, which have risen since Russia invaded Ukraine, cutting off supplies to the latter’s allies. European Commission President Ursula von der Leyen has proposed a price cap that could create an upper and lower price limit on gas imported from other countries, which could include the United States and Norway. 15 of the 27 EU members support gas price caps. A price cap has not been created, but leaders could agree to institute one at another meeting in Brussels on Thursday.
Sanctions have pushed Russia to export less gas to Europe. Price caps would intensify this effect, prompting the EU to import more of its gas from countries other than Russia. According to New York Times, Russia has tried to compensate for the loss of activity by increasing its gas exports to Asia, particularly to China and India. However, the lack of pipelines to either country prevented Russia from making up the shortfall. Falling Russian gas exports — on top of sanctions, which CNN says could cause Russia’s economy to shrink by up to 10% — will leave Russia with fewer funds to continue its offensives in Ukraine.
But price caps shouldn’t be necessary to depress demand for Russian gas, Greek Prime Minister Kyriakos Mitsotakis said. “With prices high enough, suppliers will continue to send their gas to Europe, and consumers will still have reasons to reduce demand.”
Germany is another country concerned about whether suppliers will continue to send gas to Europe if a price cap is set. A price cap “would be counterproductive if there was not enough gas available”, explained a spokesman for the German Ministry of Economics, “because then our security of supply would no longer be guaranteed”. .
If a price cap is created, Europe is likely to import more gas from Norway. However, the Washington Post reported, the EU previously wanted to reduce its imports of Norwegian gas in order to focus more on renewables and tackle climate change. An article from The Guardian said the EU plans to produce 45% of its energy from renewable sources by 2030, with wind and solar being the main sources of renewable energy. Substituting other fossil fuels for Russian gas may be cheaper and easier in some ways, but it will increase carbon emissions and contribute to global climate change.
German Chancellor Olaf Scholz had planned before the Prague summit to spend 200 billion euros to keep gas prices low, but countries that did not have enough money to lower gas prices opposed this idea. “We cannot divide ourselves according to space in our national budgets,” said Italian Prime Minister Mario Draghi, who supports a price cap. “We need solidarity.”
Countries that receive more gas from Russia also oppose the cap. According AlJazeeramost Hungarian gas imports come from Russia, and the country has opposed both a cap and some sanctions against Russia.
Yet support for the price cap plan could grow thanks to leaks created in the Nord Stream 1 pipeline. Because Russia is suspected of causing the explosions that damaged the pipeline in September, the leaks are proof that the Russia is already an unreliable source of gas products and cannot be trusted to provide a good supply to Europe. If the EU continues to depend on Russian gas, there will be more energy shortages.
The EU must create a price cap that will ensure that all countries receive gas at an affordable price in order to stop funding Russia’s war against Ukraine. Although price caps can induce energy shortages, fewer shortages will occur in the future if a greater share of Europe’s energy needs are met from renewable sources.