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News 14 September 2022

Energy crisis takes the central stage in State of the Union address


European Commission President Ursula von der Leyen delivered her annual State of the European Union speech yesterday, 14 September. At a time of particular hardship for Europe, marked by rising prices, shortages of energy and the background of the ongoing war in Ukraine, she outlined the EU’s executive policy priorities for the next 12 months.

The energy crisis took a central stage in the President’s speech, with several announcements put forward. One of the most waited for regarded the cap on gas prices, on which the European Commission essentially backed off from earlier plans to cap the price of Russian gas. Instead, it proposed to set up a task force with EU member states representatives that will attempt to negotiate different deals with different suppliers based on reliability. In parallel, the EU Chief announced the creation of a new gas market benchmark to change the current Title Transfer Facility (TFF) to reflect better the EU’s rapid shift from imported pipeline gas to liquified natural gas (LNG).

Tackling the social aspect of the energy crisis, President Von der Leyen underlined that EU countries invested billions into social protection measures to safeguard the most vulnerable households in the face of soaring gas prices. To support the financing of this effort, she announced the creation of a windfall tax on the “revenues of companies that produce electricity at a low cost” – typically renewables and nuclear. Such  a measure is expected to raise funds for more than €140 billion that Member States will eventually be able to redirect to consumers. Besides, she mentioned that a separate solidarity contribution will be demanded from oil and gas companies, which have reaped extraordinary profits from skyrocketing prices on global energy markets.

To avert the risk of investing too much in new fossil fuel infrastructure and ensure investments in future clean energy infrastructure, President von der Leyen announced the creation of a European hydrogen bank. This initiative will aim to fill the current investment gap in hydrogen and it will be financed using resources from the Innovation Fund. The new bank “will be able to invest €3 billion to help build the future market for hydrogen,” she stated.

Turning to the power market, the Commission’s President emphasised the need to “decouple the dominant influence of gas on the price of electricity to ensure consumers reap the benefits of low-cost renewables”. Moreover, von der Leyen confirmed plans announced earlier this year to work on a deep and comprehensive electricity market reform.

Addressing the climate change urgency, she touched upon the challenges arising from that front and pledged that the Union would push for an ambitious global agreement on biodiversity at the Montreal United Nations Biodiversity conference and the COP27 in Sharm el-Sheikh later this year.

Speaking of the green and digital transition, the EU Chief underlined the need to work towards the creation of an enabling business environment, the upskilling of the workforce and increased access to the raw materials needed by industry for such transition to become a tangible reality. To this end, she announced the stepping up of investments in education and training, put forward the proposal to make 2023 the European Year of Skills, and disclosed the forthcoming publication of a European Critical Raw Materials Act.