The European Union, made up of 27 member nations, has agreed to implement a gas price cap if the price exceeds 180 euros per megawatt hour for a period of three consecutive days. This measure is being taken as part of the EU’s efforts to address the current energy crisis and provide relief to consumers.
After weeks of discussion and debate, the energy ministers of the European Union have agreed on a gas price cap in response to the ongoing energy crisis. The Czech presidency of the European Council, which represents the member countries, announced the deal on Monday in Brussels. The gas price cap is intended to address the energy crisis and provide relief to consumers.
The European Union has implemented a gas price cap in an effort to lower high gas prices that have caused energy bills to rise and contributed to record-high inflation in the 27-country bloc this year. The cap was triggered after Russia significantly reduced its gas deliveries to Europe. According to EU officials and a document seen by Reuters, the cap will be triggered if gas prices exceed 180 euros per megawatt hour for three consecutive days on the Dutch Title Transfer Facility (TTF) gas hub’s front-month contract, which serves as the European benchmark.
The gas price cap agreed upon by the European Union will go into effect on February 15, 2023. Once implemented, the cap will prevent trades on the front-month to front-year TTF contracts at a price more than 35 euros above a reference level based on existing liquefied natural gas (LNG) price assessments, according to two EU officials. The decision to implement the cap has been met with criticism from Russia, with Kremlin spokesman Dmitry Peskov calling it an attack on market pricing and a violation of market processes. Peskov stated that any reference to a price cap is unacceptable.
In the face of the ongoing conflict in Ukraine and efforts to conserve energy and avoid shortages, the member nations of the European Union have stood together and implemented nine rounds of sanctions against Russia. These measures have been taken to address the energy crisis and ensure a stable gas supply, which is used for electricity generation, heating homes, and powering factories.
Despite previous efforts to address the energy crisis, the member nations of the European Union had been unable to come to an agreement on a gas price cap until Monday. Germany ultimately voted to support the deal, although it had previously expressed concerns about the policy’s impact on Europe’s ability to attract gas supplies in competitive global markets.
The Netherlands and Austria abstained from the vote, as they had previously resisted the cap due to concerns about its potential to disrupt energy markets and compromise Europe’s energy security. The decision followed months of debate and two previous emergency meetings that failed to reach a consensus on the issue.
A group of approximately 15 countries, including Belgium, Greece, and Poland, had pushed for a gas price cap below 200 euros per megawatt hour, significantly lower than the 275 euros limit originally proposed by the European Commission.
The fact that Germany, which had previously expressed doubts about the cap, ultimately voted in favor of it demonstrates the strong desire among EU leaders to address the energy crisis. Belgian Energy Minister Tinne Van der Straeten emphasized the importance of the cap in securing the energy future of the EU, ensuring affordable prices, and preventing deindustrialization. Initially, the cap will not apply to private gas trades outside of energy exchanges, although this may be reviewed once it goes into effect.