Simson: Fossil fuels should not be subject to tax incentives

European Commissioner for Energy Kadri Simson. Photo: Pilt videost

Both the green turn and European Union climate policy are blamed for high energy prices. European Commissioner for Energy Kadri Simson assures that is not the case in an interview to Postimees.

Is the green turn to blame for soaring energy prices?

It is not. High energy prices this winter are not exclusive to Europe. Prices are even higher elsewhere, for example, in the UK or Serbia. What is worse is that there are regions where production cannot cover peak consumption that leads to massive power outages. China stands out in this regard as it has tried to keep prices in check, while this has resulted in supply failing to match demand.

What is affecting the price of electricity in Europe?

If we look at Europe as a whole, high prices first hit markets that sport a greater dependance on natural gas as fossil fuel prices tend to be volatile. Gas power plants have been shaping peak prices. The price of electricity has been lower where there is more renewable production capacity.

Why did these sky-high prices appear now? There have been fluctuations in the past, while prices have been consistently high lately.

The world market price of gas is among the chief reasons regarding our energy market. The world market price is so high because the global economy has recovered faster than forecast. Suddenly, all available LNG tankers plotted a course for China where demand had spiked as they have no alternatives for gas power plants. They are building nuclear plants, while this will take time, and China was willing to pay for gas what Europe was not. We have reached a situation today where the price of gas has come down somewhat as fears of a long and cold winter have been alleviated. This also means tankers sailing the high seas are once again looking at Europe.

Will the European Commission take further measures to slow price advance?

Electricity is the energy source with the biggest renewables component today. We do want to see some fossil fuels replaced with electricity in the long run, which is what the Commission’s taxation of energy directive aims for. Taxes on electricity could be modest, while fossil fuels that we largely import and that increase Europe’s dependence should not be subject to tax incentives.

To what extent does Europe depend on Russian gas?

The gas crisis of 2009 and many European countries finding themselves cut off from supply drove the lesson home. Every member state has an LNG terminal or at least two gas links to other countries today, meaning they are not dependent on a single supplier. I believe knowing that manipulating gas deliveries is no longer as easy lends certainty.

How is the transition to renewable energy sources progressing?

Two years ago, more renewable than fossil fuel energy was produced for the first time. While consumption was down due to the Covid pandemic, prices were also down because renewable sources covered much of consumption. Member states’ targets for 2030 require the number of terrestrial and offshore wind farms to grow manyfold.