After Poland and the Czech Republic demanded stronger action to limit pollution, European Union leaders failed to reach a deal on how to react to the unprecedented gas crisis that sent energy prices to record levels.
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After two rounds of heated talks at a summit in Brussels on Thursday, the heads of government dropped plans to make a statement on the energy crunch. Two diplomats with knowledge of the talks said that the differences in their assessments of power, natural gas and emissions costs were insurmountable. A planned EU executive arm on how to classify nuclear energy and gas in the bloc's green rulebook was also a contentious issue.
Most countries in the 27 nation bloc have taken national measures to reduce the impact of the crisis on businesses and consumers, including tax cuts and direct support for the most vulnerable households. The rally is stoking concerns about inflation and risks to the economic recovery as gas shipments from Russia, the EU's biggest supplier, remain limited, with no signs of easing.
Carbon permits in the EU Emissions Trading System rose to a record 90.75 euros $102.73 per metric ton last week and are trading almost 150% higher this year. Power prices have hit all-time highs.
Polish Prime Minister Mateusz Morawiecki told reporters after the summit that the EUETS fell over and is not working. I hope that Poland has inspired the European Commission and other nations to rethink the system after some support from other countries. The EU emissions cap and trade program imposes decreasing pollution limits on more than 11,000 installations owned by manufacturers, power generators and airlines. The bloc is talking about a deep reform of the market to align the program with stricter climate targets for 2030. It involves accelerating the emissions cuts, a move that will make permits more scarce.
Earlier in the debates, Morawiecki blamed financial investors for the surge in carbon costs, an issue that was also echoed by other east European countries, including the Czech Republic and Hungary, according to accounts from diplomats who asked not to be identified because the talks were private.
In the most important question, the question of energy prices, we nearly came to blows, Hungarian Prime Minister Viktor Orban said in a video posted on Facebook. In the Czechs, the Poles, Slovaks and us Hungarians were adamant that we had to stop the rise in energy prices, be it electricity or gas. We have to remove speculators from the system. Poland, a country that relies heavily on coal for electricity production, did not find support for its request to be allowed a temporary opt-out from the EU's ETS.
According to German Chancellor Olaf Scholz, the price of 90 euros per metric ton of carbon dioxide was hard and that 60 euros seemed more reasonable, but noted that it might be hard to maintain that price because of the broader system changes. The Berlin government said last month it would consider a long-term national carbon price floor of 60 euro if the emissions price falls below such levels in the next few years.
Spain expressed concern about high prices, but Pedro Sanchez, Prime Minister, stressed after the summit that he found total questioning of the ETS completely unacceptable.
France called for action to reduce the market's volatility. French President Emmanuel Macron and Bulgarian President Rumen Radev criticized a report by the European Energy Regulators Agency on the design of the power market and a preliminary assessment of the carbon market by the European Securities and Markets Authority. The surge in prices was driven by economic and political factors, as per the ESMA last month, despite concerns over abuse in emissions trading.
Radev told reporters in Brussels that the reports are not as deep as necessary. We expect that this analysis will continue, that it ll reach a greater depth and that there should be transparency in the emissions mechanism and power exchanges, as per the promise of the European Commission. According to a report released Wednesday, researchers at the Potsdam Institute for Climate Impact Research urged the EU to strengthen the oversight of the carbon market to avoid financial investors' distortions.
The summit exposed a divide between leaders over the role of nuclear energy and natural gas in the EU green investment classification. The commission plans to present a regulation before this year on whether those two energy sources can get a clean label. Countries led by Luxembourg, Germany and Austria criticize the inclusion of nuclear and gas in the taxonomy against a group of France, Poland and the Czech Republic.
In the last days, we discussed this and will continue in the future to find a good Franco-German compromise, but that is not the condition for what remains a delegated act taken by the commission, Macron told reporters after a joint press conference with Scholz after the summit.
Thierry Breton, the EU's internal markets commissioner, said Friday that the EU needs nuclear energy as it transitions to a green economy in the face of record energy prices.
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