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ENB Pub Note: The EU’s energy and financial hypocrisy will catch up with them sooner rather than later. The following article from Tsvetna Paraskova, at Oilprice.com, is a great illustration of the EU’s dependence on Russian natural gas and then banning it only to keep buying Russian LNG. The only thing that has been consistent is the EU’s total deindustrialization through its ban on Russian energy and Net Zero energy policies.
We are watching new trading blocs form, and the UK and the EU will be left on the side of the road, wondering what happened. When energy prices get too high, deindustrialization and financial collapse will result in regime changes. The new trading blocs will include the Slavic countries migrating out of the EU, and the Asia and Indian blocs becoming the center of trade and manufacturing. The EU and UK have integrated their steel and energy policies to turn them “green” or electrify them. You cannot create military grade armor or new steel using Green Energy steel plants.
The ironic part of the EU energy policies and banning of Russian natural gas and LNG is that natural gas will be the cheapest way forward to lower costs and emissions and make their grid stable. The power outage in Spain and Portugal is only a wake-up call for the negative impact of renewables on the grid.
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Direct Impact of Policies: The EU’s Net Zero policies, including the Emissions Trading System (ETS) and renewable energy mandates, have contributed to higher electricity prices by increasing the cost of carbon-intensive energy production. The ETS puts a price on carbon emissions, which raises wholesale electricity prices, particularly when fossil fuels like coal or gas dominate the energy mix. For instance, a 2020 European Commission report noted that the ETS raised average wholesale prices, with governments providing €3 billion to offset these costs for industrial consumers.
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Renewable Energy Expansion: Policies promoting wind and solar have reduced electricity prices in some contexts by displacing more expensive fossil fuel generation. The International Energy Agency (IEA) estimated that new solar and wind capacity added between 2021 and 2023 saved EU consumers €100 billion by lowering wholesale prices, which would have been 8% higher in 2022 without these additions. However, the upfront costs of renewable infrastructure and grid upgrades can increase consumer prices in the short term through taxes and levies.
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Energy Crisis Context: The 2022 energy crisis, driven by reduced Russian gas supplies, caused electricity prices to soar, with wholesale prices reaching up to 15–20 times the 2015–2020 averages. While Net Zero policies were not the primary driver, they interacted with the crisis by incentivizing a shift to renewables, which mitigated some price spikes, and by imposing carbon costs that added to the burden of high fossil fuel prices.
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Price Increases: Quantifying the exact contribution of Net Zero policies is challenging due to overlapping factors. Industrial electricity prices in the EU were 158% higher than in the US in 2023, partly due to carbon pricing and renewable subsidies, though reliance on imported fossil fuels was a significant factor. For households, German electricity prices rose 63.7% in 2022, reflecting both market conditions and policy-driven levies. Overall, Net Zero policies likely account for a portion of the price increase (e.g., through ETS and renewable surcharges), but the energy crisis and global fuel prices were dominant drivers.
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Long-Term Outlook: The transition to renewables is expected to lower electricity prices in the long term as cheaper clean energy dominates. Bruegel notes that policy choices, like enhancing grid integration and electrification, could reduce consumer costs by 2030, though short-term costs may persist due to fossil fuel market volatility.
The European Union has a non-binding goal to phase out imports of Russian natural gas by 2027, but it’s unlikely to resort to a ban to achieve that indicative target.
The EU is set to unveil on Tuesday a roadmap for phasing out Russian gas—a pledge the bloc made in the aftermath of the Russian invasion of Ukraine in 2022.
However, Russian gas still accounts for more than 15% of the EU’s gas deliveries, including by pipeline and via LNG imports.
Russian pipeline gas supply via Ukraine stopped on January 1, 2025, after Ukraine refused to negotiate an extension to the transit deal.
However, some European countries, including Hungary, continue to receive Russian gas through the TurkStream pipeline via the Balkans.
Hungary is also opposing any new energy sanctions against Russia, especially in gas supply, which suggests that an EU ban or embargo on Russian gas imports – necessitating a unanimous approval by all 27 EU member states – is unlikely to fly.
EU Energy Commissioner, Dan Jørgensen, will present a roadmap this week with concrete measures to phase out all imports of Russian fossil fuels, “so that we will no longer rely on a hostile power for our energy supply,” European Commission President Ursula von der Leyen said at the end of April.
The EU has reduced the share of Russian gas imports, from 45% of all gas imports before 2022, down to 18% now, von der Leyen noted.
However, the EU has boosted imports of Russian LNG in recent months.
Last month, reports emerged that the EU is looking for legal ways to tear long-term natural gas supply contracts with Russia’s Gazprom without having to pay sizable penalties. The leading option is declaring a force majeure, the Financial Times reported in mid-April, citing officials from the European Commission.
Yet, lawyers told Reuters this week that the force majeure is unlikely to work, considering the three years that have passed since the Russian invasion of Ukraine.
By Tsvetana Paraskova for Oilprice.com
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The post EU Has Limited Legal Options to Cut Off Russian Gas Supply appeared first on Energy News Beat.
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