The EU Is Now Better Prepared to Deal with the Interruption of Gas Flows
Following the Russian aggression on Ukraine, the EU has been very active in the field of energy law. The EU is one of the largest energy consumers worldwide. However, it is not energetically self-sufficient. Energy is a key geostrategic asset and the war in Ukraine highlighted the vulnerability of the EU, being Europe highly dependent on Russian gas, calling for a swift reaction. The energy crisis posed a dilemma between climate ambition and energy security. At the same time, it offered momentum to speed up the green transition.
Energy is a shared competence of the EU and appears in a dedicated Title of the Treaty on the Functioning of the EU (TFUE). Here, Article 194 TFEU enlists the aims of the Union's energy policy which are: ensuring the functioning of the energy market, security of the energy supply of the Union, promoting energy efficiency and energy saving, and the development of new forms of energy and, finally, promoting the interconnection of energy networks. It foresees an ordinary legislative process in which the European Parliament and the European Council act on an equal footing. Energy is also referred to in an emergency clause placed in the Economic Policy Chapter of the TFEU, which is Article 122(1).
This article, little used before the pandemic, is gaining importance as it is currently the legal basis for the Recovery Instrument, one of the key pillars of the NextGenerationEU, the funding plan adopted in the aftermath of the Covid-19 crisis. Article 122(1) TFEU provides that the Council may take decisions in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, if severe difficulties arise in the supply of certain products, notably in the energy sector. The explicit reference to the energy sector allowed the EU to rely extensively on it to tackle the current energy crisis. However, this choice has been contested as Article 122 TFEU leaves crisis decisions in the hands of the Council only, sidelining the European Parliament.
The EU's reaction to the Russian "weaponization" of the European energy sector was at 360 degrees. First, the EU introduced a Gas Storage Regulation, based on Article 194 TFUE, which sets filling targets for the aggregated capacity of all underground gas storage facilities located in the territories of the EU Member States. This measure considers that supply disruptions of pipeline gas can occur anytime, and it is crucial to safeguard the security of the gas supply for the winter. At the time of writing the Member States have already reached the 90% filling target provided for in the Regulation. Other initiatives are based on Article 122 TFEU and are temporary. They include Council Regulation setting a target for Member States to reduce their natural gas consumption by 15% voluntarily or mandatorily if the situation so requires; Council Regulation which creates a joint gas purchase platform where gas undertakings can aggregate their demand. The idea is to strengthen solidarity among Member States in gas import decisions. This Regulation also provides a temporary intra-day tool to manage excessive gas prices and solidarity rules to follow in case of a gas emergency. The EU has also introduced new rules to simplify the deployment of renewable energy and established a "solidarity contribution" on excess profits for companies operating in the fossil fuel sector.
On top of these measures, the EU launched the REPowerEU plan to support investment in the energy sector indispensable for European energy resilience financed by NextGenerationEU's funds. In the meantime, the Commission has issued a proposal for reviewing the EU's internal electricity market design with the ambition of making electricity bills less dependent on short-term fossil fuel prices. The skyrocketing electricity prices experienced last year forced the EU to step into the energy legislative sphere. The emergency actions introduced are remarkable in terms of scope and speed and make the EU more prepared to deal with winter energy shocks.