The European Union continues its search for an answer to its energy crisis. 🔎
The region had been exploring the idea of price caps on Russian oil but scrapped the idea after Putin threatened to cut off all gas supplies to the region. Inflation is already at record highs, and further cuts to their gas supplies would only exacerbate the issue.
Additionally, the commission floated the idea of a generalized price cap on all gas imports. While 15 EU states favored that proposal, several countries doubted its effectiveness. Others say it could be counterintuitive, sending much-needed energy supplies to other countries without price caps.
As a result, the European Commission has shifted its focus elsewhere. Their latest proposal would cap the revenues of non-gas energy producers and help power firms stay afloat.
Currently, wind, nuclear, and coal-fired power plants are selling their power at record prices determined by the cost of gas. Under the new proposal, the government would take those companies’ excess profits and use them to subsidize consumer energy bills. In addition, fossil fuel companies would have to pay a “solidarity contribution” not to single out the non-gas energy producers.
They’re also exploring offering emergency funds to power firms facing soaring collateral requirements from market exchanges. The funds would work alongside the European Central Bank’s “emergency liquidity instruments” outlined by Christine Lagarde yesterday to backstop energy companies exposed to market forces. 💰
The European Commission will meet on Tuesday to review proposals on implementing these ideas.
For now, though, it sounds like the overall process could look something like this: customers pay crazy energy bills -> energy firms rake in massive profits -> the government takes the excess profits -> gives money back to customers to help them pay crazy energy bills. And it goes round and round from there. 🤷