EU Commission sends draft to member states
Sets cap on gas trading prices
Policy for energy sharing and joint purchasing among member states
[Asia Economy Reporter Lee Ji-eun] The European Union (EU) Commission plans to propose a temporary cap on natural gas prices ahead of the EU summit scheduled to be held this week in Brussels, Belgium.
On the 18th (local time), the EU Commission announced that it had proposed to member states a plan to set a price cap specifically for the natural gas futures market.
According to Bloomberg, the EU intends to set a maximum price for gas trading on the Netherlands TTF futures market and propose that prices move within approximately 5% of that cap. The TTF futures price is used as a key indicator in determining overall energy prices in Europe. However, the measure is conditioned to be triggered only under specific circumstances, such as when energy prices exhibit extreme volatility.
Alongside this, the EU also proposed a plan to inject substantial financial resources to support households and small and medium-sized enterprises in member states experiencing energy supply shortages. The Commission also stated that further study is needed on sharing gas between countries facing shortages and all EU member states.
The EU Commission anticipates that after this winter, if gas shortages occur, countries may competitively purchase gas, and thus has formalized plans to begin joint purchasing around April next year.
Frans Timmermans, Vice-President of the EU Commission, said that if the gas price cap is implemented, "European families will stay warm, and industries will continue to operate."
This is the first time the EU Commission has officially proposed a price cap, interpreted as a compromise after some member states opposed applying a fixed price cap. EU member states with financial leeway, such as Germany, expressed concerns that if a price cap is implemented in Europe, gas supplying countries might be reluctant to export at lower prices, potentially worsening energy supply instability.
EU leaders are scheduled to discuss the measures proposed by the EU Commission at the EU summit on the 20th. However, since the proposal is still in draft form, foreign media predict that details may change depending on conflicts of opinion among member states, and it is uncertain whether a short-term agreement on the cap range can be reached.
The EU Commission explained, "For the gas price cap to be implemented, gas flows between EU member states must not be disrupted, the price cap should not lead to increased gas demand, and the derivatives market must continue to function efficiently."
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