EU Set to Target 15% Reduction in Natural-Gas Use on Russian Supply Woes

(Bloomberg) -- The European Union is set to propose a voluntary 15% cut in natural gas use by member states starting next month on concern Russia may halt supplies of the fuel.

The goal would be embedded in a regulation accompanying a demand-reduction plan the European Commission is scheduled to unveil Wednesday to cope with a potential full cutoff by Moscow. The measure also would include a mandatory trigger if the situation worsens and voluntary curbs are insufficient, according to three EU diplomats with knowledge of the matter.

The EU’s biggest challenge this winter is to ensure sufficient gas supplies to fuel furnaces and power generators. Russian President Vladimir Putin signaled that Europe will start getting gas again through a key pipeline, but warned that unless a spat over sanctioned parts is resolved, flows will be tightly curbed.

Under its “Save gas for a safe winter” plan, the commission aims to recommend steps that include reducing heating and cooling, as well as market-based measures. The roadmap will be unveiled around noon in Brussels at a press conference with EU Commission President Ursula von der Leyen, climate chief Frans Timmermans, energy commissioner Kadri Simson and internal market commissioner Thierry Breton. 

As much as 1.5% of the region’s gross domestic product is at risk in the event of a harsh winter, according to a draft commission estimate seen by Bloomberg News. 

The commission is working under the assumption that Russia will not resume full deliveries via the Nord Stream 1 pipeline that has been closed since earlier this month for repairs, Budget Commissioner Johannes Hahn told reporters on Tuesday. Putin said later on the same day that if a pipeline part that was caught up in sanctions isn’t returned to Russia, then the link will only work at 20% of capacity as soon as next week -- as that’s when another part that’s now in Russia needs to go for maintenance. 

Read more: EU Plans Steps to Cushion Impact of Sudden Russian Gas Halt

Curtailments of Russian shipments have affected 12 member states and prompted Germany to raise its gas-risk alert to the second-highest level last month. Overall flows from Russia in June were less than 30% of the 2016-2021 average, according to the document.

The commission’s plan goes in the right direction, according to Simone Tagliapietra, a researcher at the Bruegel think-tank in Brussels.

“EU member states must now adopt the proposed gas demand-reduction targets and make comprehensive efforts to reduce demand wherever possible,” he said. “Governments must ask people to consume less and should have the courage to tell their citizens that Europe is in the midst of what possibly represents the greatest energy crisis in its history.”

The planned regulation would grant the commission the right to declare a union-wide alert when there is a substantial risk of a severe supply shortage or a demand spike, according to the diplomats, who asked not to be identified as talks on the proposal are private. The EU has a policy of not commenting on draft rules.

The measure will need approval from member states, which the commission may seek as soon as next week during an emergency meeting of energy ministers. A large group of countries opposes mandatory cuts, arguing that national governments already have emergency plans and will reduce demand regardless of whether they are obliged to by the EU, the diplomats said.

(Updates with Russian President Putin from third paragraph.)

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