The EU wants to speculate its method out of the power disaster –


European governments’ spending to guard households and companies from excessive fossil gas costs will increase Europe’s dependence on them. The European Union can step in with loans to help a significant power transition funding programme, writes William Todts.

William Todts is the manager director of the European Federation for Transport and Atmosphere (T&E). 

EU governments have spent €674 billion to this point shielding households and companies from excessive oil, fuel and different fossil gas prices. This unprecedented intervention retains residents heat but additionally retains them hooked on the very fossil fuels that induced the power disaster. 

Including gas to the fireplace

In a market financial system, excessive costs (actual or engineered, as OPEC lately demonstrated) are an expression of shortage. The one technique to structurally decrease costs is to change the demand-supply steadiness. In that context, spending €674 billion to help demand really makes the issue greater. 

For instance, Europe’s €35 billion gas tax minimize did little or no to ease ache on the pump. As a substitute, it helped oil producers akin to Russia make more cash. Some international locations, akin to Germany, have discovered this lesson and ended gas responsibility cuts[1]. 

It will get worse when you think about what we might do with €35 billion. In keeping with calculations by our associates on the Clear Cities marketing campaign in Could 2022, simply €16 billion would pay for VAT on 200 million bikes; 300 million free public transport passes, or 1000’s of shared electrical automobiles.

The identical precept applies throughout the financial system. An enormous chunk of the €674 billion – twice the scale of the US Inflation Discount Act – ought to have been used to renovate hundreds of thousands of properties, equipping individuals with photo voltaic panels, warmth pumps and insulation. 

A capital drawback

That’s precisely what wealthy Europeans are doing. Nonetheless, the overwhelming majority of Europeans don’t have the tens of 1000’s in spare money wanted to put money into a warmth pump, electrical automobile and new home windows. The issue for firms is totally different – they’ve cash, however might choose to delocalise manufacturing – however the answer is comparable: large funding in clear, reasonably priced power and cleantech manufacturing.

Each households and companies want public help. And right here’s the issue: authorities deficits have ballooned throughout COVID and stay excessive. Add to this greater rates of interest and a looming recession and it turns into clear most governments, particularly these with excessive debt-to-GDP ratios, can have no room for large funding programmes.

The EU to the rescue?

There’s one actor that has the power to borrow comparatively cheaply and has the type of long-term imaginative and prescient and focus required to drag off a significant power transition funding programme: the European Union.

The EU’s €700 billion COVID Restoration Fund (NextGenerationEU) is the continent’s most essential funding programme. Sadly, solely a part of the NextGen was for ‘greenery’ and lots of the supposedly inexperienced NextGen tasks miss their mark.

For instance, a €22 billion high-speed prepare between Salerno and Reggio di Calabria will not be a precedence proper now. We want our greatest engineers and staff to use their brilliance to our largest issues, not new roads, or white elephant rail tasks.

Sure, the Fee ought to assessment the NextGen spending plans, however reshuffling present funds will not be ok given the dimensions of the problem. Enormous quantities of further funding are required to speculate ourselves out of this disaster.

NextGenerationEU broke the taboo on EU borrowing. The US Inflation Discount Act is doing the identical to industrial coverage taboos. With the appropriate investments now, we will be certain that that is the continent’s final power disaster. 


[1] Nations which have ended cuts to gas excise responsibility: Czechia, Germany, Greece, Luxembourg, and Slovenia. Nations which have continued cuts to gas excise responsibility: Belgium, Bulgaria, Croatia, Cyprus, France, Eire, Italy, Malta, Netherlands, Poland, Portugal, Spain, and Sweden. Nations that didn’t minimize gas excise responsibility: Austria, Denmark, Estonia, Finland, Latvia, Lithuania, Romania, and Slovakia. 

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