The European Union facing the abyss: legislative review in the face of the energy crisis, 2022

Abstract

The European Union has suffered an energy crisis since June 2021 due to cyclical and structural factors, such as the climate crisis, the war in Ukraine and dependence on fossil fuels. EU leaders agreed on a new energy strategy to tackle the crisis and lay the foundations for a sustainable and decarbonised economy. The article aims to analyse energy prices and supply and the measures Europe took in 2022 to tackle the crisis. This European strategy includes promoting energy efficiency, diversifying energy sources, and reducing dependence on fossil fuels. EU legislative measures have also been proposed, such as a safety cap for gas prices and a temporary dynamic price corridor. However, some actions take time to implement quickly and effectively, and there may be costs and impacts on specific economic sectors. It is also difficult to predict the long-term effect of structural changes.

Keywords:

• European energy crisis
• energy prices
• energy sovereignty
• energy strategy
• legislative measures
• green transition

Acknowledgements

We are grateful for the comments made by the reviewers that have made this paper clearer and more concise.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

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2 MIBGAS became operational as Iberian in January 2021 and before that in October 1998

3 Royal Decree-Law 6/2022, of 29 March, adopting urgent measures within the framework of the National Plan of response to the economic and social consequences of the war in Ukraine

4 ‘Questions and Answers on the Gas Market Correction Mechanism’ (European Commission, 22 November 2022) https://ec.europa.eu/commission/presscorner/detail/en/qanda_22_7066

5 ‘Investing’ (Dutch TTF Natural Gas, 1 December 2022)

6 Royal Decree-Law 6/2022 (n 5)

7 Prices, Labor Income and Poverty (Confederal Economic Cabinet of Comisiones Obreras, 10 June 2022)

8 D Borge-Diez, E Rosales-Asensio, E Açikkalp, and D Alonso-Martinez, D, Analysis of Power to Gas Technologies for Energy Intensive Industries in European Union (Energies 2022, 538); A Ari and others, Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels (152: IMF Working Papers 2022)

9 B McWilliams and others, How Would the European Union Fare without Russian Energy? (Energy Policy 2023, 113); R Lane, Bottlenecks and Monetary Policy (European Central Bank, 10 February. 2022); O Celasun and others, Supply Bottlenecks: Where, Why, How Much, and What Next? (IMF Working paper 2022)

10 D Pereira Macedo, A Cardoso Marques and O Damette, The Role of Electricity Flows and Renewable Electricity Production in the Behavior of Electricity Prices in Spain (Economic Analysis and Policy 2022, 885-900); C Batlle, T Schittekatte, C Knittel, Power Price Crisis in the EU: Desperate Times Call for Desperate Measures (SSRN 2022)

11 L Cárdenas and P Villanueva, ‘Labor policy in the face of the COVID-19 socio-economic crisis in Spain: institutional change and social pacts’ (2022) Employee Relations: The International Journal, ahead-of-print; M Porras-Arena and others, Okun's Law: The Effects of the COVID-19 Pandemic and the Temporary Layoffs Procedures (ERTE) on Spanish Regions (working paper, Global Labor Organization (GLO), Essen 2022)

12 Economic and Social Council of Spain, Report on the Socioeconomic and Labor Situation in Spain 2021 (June 2022)

13 Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 concerning common rules for the internal market in electricity and amending Directive 2012/27/EU

14 Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity

15 Proposal for a Regulation of the European Parliament and of the Council concerning the internal markets for natural gas and renewable gases and hydrogen (recast version), European Commission, 15 December 2021

16 Under the ‘Fit for 55’ legislative package, the EU is reviewing the following regulations: EU Emissions Trading Scheme; member state emission reduction targets; the Regulation on emissions and removals from land use, land-use change and forestry; the Energy Efficiency Directive; CO₂ standards for emissions from passenger cars and vans; the Directive on the Taxation of Energy Products and Electricity; and the Border Carbon Adjustment Mechanism. It also proposes ReFuelEU Aviation, to promote sustainable fuels in aviation; a proposal on the use of renewable and low-carbon fuels in shipping; and a Social Climate Fund. In relation to the draft law on the reform of the EU Emissions Trading Scheme and the EU Border Carbon Adjustment Mechanism, it should be noted that the Environment Council reached an agreement on 17 March and 15 March of this year, respectively. However, both proposals were rejected by the Environment Committee of the European Parliament on 9 June 2022

17 Spain’s limited interconnection with other countries and its strategic position to redirect LNG to the European Union as a whole has led to the application of the exception: a 7% reduction in gas demand

18 ‘Infra-marginal electricity producers’ refers to technologies with lower costs, such as renewables, nuclear power and lignite, which supply electricity to the grid at a cost below the price level set by the most expensive marginal producers

19 This measure and the previous one are in contradiction with the bill presented in the Congress of Deputies last July, which proposes to require the main operators of the energy sector to pay a non-tax public benefit of 1.2% calculated on the net turnover of each of the entities subject to the tax, for the years 2023 and 2024, and not for a single year as proposed in the European Regulation currently being processed

20 Council regulation ‘Establishing a market correction mechanism to protect citizens and the economy against excessively high prices' 2022/0393 (NLE)