EU Leaders Urge Gas Price Cap Deal as Level Remains Open

(Bloomberg) -- European Union leaders threw their weight behind a quick agreement on a natural gas price cap to put an end to months of political wrangling over an unprecedented intervention to contain the impact of an energy crisis. But they still have yet to settle on a price level.

At a summit in Brussels, the leaders agreed to a joint statement calling on the ministers to “finalize” on Monday their work on the so-called market correction mechanism. A deal on the gas price cap would also unlock a broader package of measures to rein in high energy prices that sent businesses and consumers reeling.

The plan to step into the market, demanded by a group of member states as far back as the spring, has caused a deep rift among governments. At the last emergency meeting of energy ministers on Tuesday, countries made headway on the design of the cap but failed to reach a deal because of a German-led push to delay the decision until the next ministerial gathering on Monday.

While Thursday’s political endorsement from leaders provides fresh impetus for next week’s talks, the key sticking point — the exact price level that will trigger the intervention — remains an open issue that the ministers still have to resolve. The heads of government discussed a price cap in a range of between €160 and €220 per megawatt hour, compared with the €275 level originally proposed by the EU’s executive arm, according to diplomats with knowledge of the matter. Germany signaled it’s willing to go as low as €180, according to one diplomat.

Cap Safeguards

German Chancellor Olaf Scholz said all EU leaders agreed on the importance of attaching safeguards to the planned gas price cap so that the mechanism can be suspended if the supply security in one member state is in danger. He added that at the end of the day, the gas price cap would be designed in a way and set so high that it will “hopefully never be relevant.”

But supporters of a more robust mechanism said they are continuing to push for a lower price level.

“We have moved much closer to the cap level that’s been proposed by Lithuania and like-minded countries,” Lithuanian President Gitanas Nauseda, said. “We can still make yet another step forward before Dec. 19.”

Intercontinental Exchange Inc., which operates global financial exchanges, warned that the viability of Europe’s biggest natural gas trading hub — the Dutch Title Transfer Facility — could be at risk if the region approves the price cap plan.

The rapid introduction of the so-called market correction mechanism would give no time to adapt and test the system’s resilience and risk management systems, ICE said in a statement late Thursday. “It is the responsibility of ICE as the market operator to consider all options if this mechanism is agreed, up to and including whether an effective market in the Netherlands is still viable.” 

A group of countries supporting a more aggressive intervention, including Poland, Romania, Croatia and Bulgaria, demanded the price cap to be set below €200, according to the diplomats, who asked not to be identified because the talks are private.

At stake is the future of the bloc’s $17 trillion economy, where soaring energy prices have already fueled inflation, threatening to push the region into recession. With Europe battling a blast of winter weather, governments are coming under increased pressure from voters to act or risk a backlash.

--With assistance from , , and .

(Updates with Scholz quote starting in fifth paragraph)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.