(Bloomberg) -- The record spike in energy prices must not undermine the European Union’s resolve to cut emissions and should instead become a trigger for the region to speed up its green transition, the bloc’s climate chief said.
“Instead of being paralyzed or slowing things down because of the price hike now in the energy sector we should speed things up in the transition to renewable energy so that affordable renewable energy becomes available for everyone,” Frans Timmermans told members of the EU Parliament on Tuesday. “That’s the lesson we should draw from the present situation.”
Gas, electricity and carbon prices are surging to all-time highs in the 27-nation region as the bloc’s economies rebound from the Covid-19 pandemic slowdown. The surge in demand comes amid lower gas imports from Russia and Norway, prompting concerns about inadequate storage levels. At the same time, an EU proposal to toughen climate policies this decade spurred investors’ demand for emissions permits.
The soaring costs are set to boost bills for millions of businesses and households, posing a big challenge for the EU to garner political support for its transition to greener energy. The European Commission’s proposal in July to deepen the 2030 emissions-reduction goal to at least 55% from 1990 levels requires backing from national governments and the EU Parliament to become a law.
Europe’s benchmark power price traded above 100 euros ($118) per megawatt-hour for the first time on Monday, with German electricity prices for next year almost doubling in 2021. On an annual basis, a doubling of wholesale electricity prices to 100 euros would imply that EU consumers pay up to 150 billion euros more more for their electricity, according to the Brussels-based Bruegel think tank.
“The one thing we cannot afford is for the social side to be opposed to the climate side,” Timmermans said. “I see this threat very clearly now that we have a discussion about the price hike in the energy sector.”
EU emission permits surged to an all-time high of 63.35 euros last week and traded around 61 euros on Tuesday. Only about a fifth of the energy price increase can be attributed to rising carbon prices, according to Timmermans. The rest is a consequence of supply shortages.
“The one thing I hope to avoid is that we are paralyzed by the fear of change, paralyzed by the consequences of what we need to do,” he told the lawmakers. “We have to be very clear on one thing: whatever measure you take, all these measures have a price effect. And the art of politics will be to ensure that the price effect doesn’t affect the most vulnerable.”
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