With energy bills soaring across Europe, Marco Magrini examines what a market-based approach to fossil-fuel faze out will really mean
Get ready – winter is coming. The winter solstice will occur on Tuesday, 21 December at 15:59 GMT sharp. A dreadful menace will soon be hanging over Europe.
Thanks to several technical, political and some downright unfortunate circumstances – including a lack of wind in summer and Russia restricting its supply – gas inventory levels have eroded to historic lows. In turn, electricity bills have soared to unimaginable highs. A chilly winter, energy experts warn, could lead to gas shortages and, consequently, to widespread blackouts.
Policymakers in both Britain and Europe have three options: increase gas supplies, ramp up coal-fired plants or reduce consumption. Unfortunately, a huge increase in gas stocks is almost impossible at this stage. Resorting to coal would be inappropriate to say the least – particularly in the wake of all the grand promises we heard at COP26. And, in order to reduce consumption, prices would have to be even higher.
The idea that gradually raising the cost of fossil fuels will promote the adoption of renewable energy – a so-called ‘market-based approach’ – has always been at the heart of climate change negotiations and carbon markets, such as the EU’s Emissions Trading System (ETS). Here, energy-hungry industries that have been granted ‘allowances’ to emit carbon dioxide can trade them. Those that need to produce more CO2, buy; those with a surplus, sell. In September, these allowances reached a record-high price of €65.77 per tonne of CO2 equivalent. This carbon price gets added to energy bills – which means that the more we rely on fossil fuels, the higher energy bills rise.
As part of its Green Deal package, the EU was preparing to extend the ETS to road transport and heating – in other words, to small businesses and households. But with energy prices already skyrocketing, the project may turn out to be unfeasible. European leaders well remember what happened in 2018 when French president Emmanuel Macron raised fuel taxes to discourage the use of fossil fuels – the move ignited the gilet jaunes protests. On the other hand, going back on the plan may render the bloc’s climate targets for 2030 simply unreachable.
Meanwhile, China and India have been struggling with power cuts sparked by coal shortages. Oil, natural gas and coal prices have all risen worldwide and the crisis could go global. Let’s face it: decarbonisation is far from simple.