Energy prices are currently exploding across Europe. The poor and low-wage earners suffer particularly badly from this. As early as 2019, when prices were significantly lower, around 30 million Europeans were unable to heat their homes adequately, criticized the Jaques Delors Institute in the spring of this year. The EU Commission itself assumes that 34 million people in the Union are affected by energy poverty, i.e. who lack the money for warm heating and electricity. The problem is most serious in southern and eastern Europe. But even in Germany there are hundreds of thousands of people who have their electricity cut off every year because they couldn’t pay their bills. The EU directive on the internal electricity market from 2019 explains the reasons: “Low incomes, high energy costs and low energy efficiency in houses are important factors.”
The corona pandemic has exacerbated the situation across Europe. Above all, precarious workers have lost their jobs. In lockdown, they were also forced to spend more time in their own four walls. In any case, the poor have to spend a higher percentage of their income on energy. When prices go up, they run out of money elsewhere. And now those affected are facing a winter with energy prices at record levels.
The EU Commission must therefore react. She recognized the problem of “energy poverty” and in 2016 she set up an observation and coordination center. However, that did little to change the situation of those affected. There is the above-mentioned guideline from 2019, which allows measures at national level “which benefit vulnerable customers and those affected by energy poverty”, but ultimately it is up to the member states whether and how they tackle the problem. The Commission is planning a “climate social fund” to help low-income families, but this fund will not come before 2025. Energy Commissioner Kadri Simson promised “new guidelines” from the Commission at the end of September to help the member states. Because national solo efforts are actually tricky, as the EU has created a common internal energy market. Electricity is a commercial product – from Spain to Finland.
The market should fix it, but apparently it doesn’t. On the contrary: For example, hedge funds are currently driving energy prices higher. This also endangers the fight against climate change. Because many consumers blame the increasing share of renewable energies for the price increases.
On Wednesday, Simson presented their “toolbox” that states can use to reduce energy prices. “Do not expect any radical measures,” a columnist of the always well-informed online portal “Politico” clarified.
And in fact the “free” electricity market is not supposed to be regulated: “No alternative market model would now deliver lower prices,” stressed Commissioner Simson. Instead, the Member States themselves should take action, for example by lowering taxes and duties.
Low-income households can therefore also receive vouchers that are financed with the income from the emissions trading system. In addition, the federal states can grant consumers a deferred payment for electricity. In doing so, the Commission leaves the countries of Southeast Europe, which lack the necessary money for such aid, largely alone. Especially since all of this is not new, but something similar is already in the EU directive from 2019. After all: by the end of the year, Samson wants to propose a reform of the gas market. The EU should invest more in storage capacity and thus create strategic gas reserves. Germany is noticeably holding back. The most powerful EU state sees no need for action.
Other governments have already responded. Spain has lowered the VAT on electricity and Italy is also reducing energy taxes. France is capping the prices for electricity and gas, and six million low-income households there are to receive an energy check for 100 euros. But in the end, all of these are just individual measures; there is no Europe-wide strategy.
That is why Spain, France, Greece and Italy are calling for a joint response from the EU states. Governments fear that energy prices will remain high over the long term. However, the EU Commission considers the price explosion to be a temporary problem. EU Energy Commissioner Kadri Simson nevertheless admitted: “Gas prices will remain high all winter.” The prospects are not good, especially because the price of electricity is linked to the price of gas. Gas-fired power plants determine the prices in the electricity market because they can be ramped up quickly to cover peaks. That is why the nuclear power country France is calling for the electricity price to be separated from the gas price in the future.