Aagesen requests coherence in the European response to the energy impact of the war

European governments are discussing these days how to articulate the community response to the economic consequences of the war, whose effects are already beginning to be felt in citizens' pockets, as various ministers have acknowledged in recent weeks. The Spanish delegation arrives at the meetings held this week with a clear premise: to demand from European institutions a long-term action plan that allows for a more solid approach to the economic effects of the crisis.

Spain wants to convey to its counterparts the need to design “structural measures” that provide coherence between the short-term vision and the strategic objectives of the European Union. In the opinion of the Executive, the decisions adopted now must avoid improvised solutions that could generate new problems in the future.

“We cannot err, we cannot look for false shortcuts that lead us to the depth of the well and to be increasingly dependent,” expressed the third vice-president of the Government, Sara Aagesen, upon her arrival at the Energy Council held this Monday in Brussels.

A package of measures with strategic vision

In La Moncloa, they indicate that they are working on a response package that is not limited to acting as a "temporary patch", but rather is integrated into a long-term strategy. The idea is to combine conjunctural measures with structural reforms that allow reducing the energy vulnerability of the European Union.

Aagesen has announced that the Spanish plan contemplates different lines of action. In the first place, the focus will be placed on protecting the most vulnerable groups, especially those most exposed to energy price fluctuations.

The vice president has specifically mentioned hauliers, the agricultural sector and the fishing sector, sectors that depend directly on the cost of fuels and that could suffer with greater intensity the impact of the crisis.

Additionally, the package will include specific measures in the energy sector, aimed at ensuring that actions effectively reach final consumers. The Government also wants to strengthen supervision mechanisms to prevent possible abusive practices in the energy market.

The crisis in Iran reopens the European energy debate

The new international situation opened after the crisis in Iran has given rise to a new offensive by the Spanish Government in community institutions. The strategy is not limited to the political sphere —marked by the message of “no to war” defended by President Pedro Sánchez— but also extends to the energy sector.

The Ministry for Ecological Transition works to consolidate an alliance among several European partners in defense of renewable energies and the carbon credit system as pillars of community energy policy. “Energy is used as a weapon of war. Spain's vision is that we have to accelerate the energy transition,” Aagesen has stated.

The Government's position is based on the idea that a faster energy transition would allow to reduce European dependence on fossil fuels, a vulnerability that has been especially exposed after the geopolitical crises of recent years.

According to the vice president, the Spanish case demonstrates that the volatility of energy markets has a lesser impact when the weight of renewable energies in the energy system increases.

Defense of the European emissions trading system

In this vein, last week a group of five countries —among them Spain— sent a letter to the president of the European Council, António Costa, in which they demanded to keep intact the current green architecture of the European Union.

The letter, also signed by Denmark, Finland, Portugal and Sweden, especially defended the European emissions trading system against the criticism of some countries, among them Italy, which have questioned its operation.

For these five countries, the carbon credit system continues to be the most effective and efficient instrument that the European Union has to reduce emissions and guide investments towards more sustainable sectors.

The signatories emphasize that a robust carbon price constitutes an indispensable piece for driving Europe's industrial transformation, incentivizing innovation and the modernization of the productive fabric.

A “keystone” of European climate policy

During the meeting held this Monday, Aagesen has defended that emissions trading constitutes a true “keystone” of the European climate system. According to the Spanish Government, this mechanism “has proven that it works, that it incentivizes investments and that it modernizes the productive fabric”.

Diplomatic sources assure that the Spanish negotiating team is aware of the direct relationship between the debates that had been taking place about the European energy system and the situation generated by the escalation of tension in the Middle East. "We have made a lot of effort to get here and that has allowed us to verify that this is the answer," confess sources close to the negotiation.

Decarbonization versus energy volatility

The same sources emphasize that decarbonization is the best guarantee the Twenty-Seven have to avoid energy crises like those currently occurring.From the Government, they maintain that advancing in this process can also contribute to reducing energy prices, by decreasing dependence on raw materials subject to strong geopolitical tensions.

"It is a useful tool to reduce prices," they point out from the Executive, where they consider that the public debate on these policies has become excessively politicized, to the point that on occasion "it does not correspond with the reality of the mechanisms."

The European Commission plans to present the architecture of its energy response to the crisis during the summit of European leaders to be held this Thursday. During a recent debate in the European Parliament, the President of the Commission, Ursula von der Leyen, opened the door to several measures, including the possibility of establishing a cap on the price of gas. “We are preparing different options. The possibility of subsidizing or limiting the price of gas,” stated the German leader.

The idea that Brussels is studying would consist of applying these measures to mitigate the effect that the rising cost of gas has on other energy sources, especially in the electricity market. "It is crucial that we reduce the impact," Von der Leyen stated.

State aids and long-term contracts

Among the tools that the European Union is considering is also the possibility of relaxing state aid or promoting greater use of long-term energy contracts, mechanisms that could provide greater price stability. It would not be the first time that the European Union discusses such a solution. At the beginning of the Russian invasion of Ukraine, the Twenty-Seven agreed on a limit of 180 euros per megawatt hour for the European gas benchmark index.

However, that mechanism was never activated due to the strict conditions established for its application. In the Spanish Government, they consider that it is still premature to make definitive assessments on the content of the plan that Brussels is preparing. However, sources from the Executive recognize that there are discussions underway, although they start from different approaches among the Member States.

Furthermore, the Executive wonders to what extent the current context is comparable to what was experienced in 2022 after the Russian invasion of Ukraine, when the European Union was forced to react quickly to the energy crisis.

A summit marked by geopolitics

In any case, the European Union faces a new key appointment on the calendar. This Thursday, the Twenty-Seven will meet in the European Council with a new conflict open on the other side of the Mediterranean.

Initially, the summit was intended for European capitals to begin to define a roadmap aimed at strengthening the economic competitiveness of the bloc and regain ground against other global powers.

However, once again, the European agenda has been conditioned by the evolution of the international situation. Again, European leaders arrive at the summit forced to react to external geopolitical crises, while trying to maintain the balance between energy security, climate transition, and economic stability.