The European Union proposed that the bloc cut its natural gas consumption by 15% over the next eight months in a plan that would affect all households, power producers and industry.
The goal is embedded in regulation accompanying demand-reduction guidelines for governments amid growing concern that Russia will cut gas exports to the region after being hit with sanctions following its invasion of Ukraine. The measure put forward by the European Commission includes a mandatory trigger if the situation worsens and voluntary curbs are insufficient.
“The European Union faces the risk of further gas-supply cuts from Russia due to the Kremlin’s weaponization of gas exports, with almost half of our member states already affected by reduced deliveries,” the commission said Wednesday in a statement. “Taking action now can reduce both the risk and the costs for Europe in case of further or full disruption.”
The EU’s biggest challenge this winter is to ensure sufficient gas supplies to fuel furnaces and power generators. Russian President Vladimir Putin has signaled that Europe will start getting gas again through the key Nord Stream pipeline, but warned that unless a spat over sanctioned parts is resolved, flows will be tightly curbed.
“I’m confident we can master this Russian-engineered energy crisis by staying together,” European Commission President Ursula von der Leyen said at a press briefing.
Under its “Save gas for a safe winter” plan, the commission recommended steps that include reducing heating and cooling, switching to other fuels and market-based measures. Curtailments of Russian shipments have already affected 12 member states, and prompted Germany to raise its gas-risk alert to the second-highest level last month. I’m confident we can master this Russian-engineered energy crisis by staying together.
The commission is working under the assumption that Russia won’t resume full deliveries via Nord Stream, which has been closed since earlier this month for repairs, Budget Commissioner Johannes Hahn said on Tuesday. Putin said later that day that if a pipeline part caught up in sanctions isn’t returned to Russia, then the link will only work at 20% of capacity as soon as next week — as that’s when another part that’s now in Russia needs to go for maintenance.
A halt of Russian gas supplies to the EU could potentially reduce its gross domestic product by as much as 1.5% if the winter is cold and the region fails to take preventive measures to save energy, the commission estimated. In the event of an average winter, a cutoff may lower GDP by between 0.6% and 1%.
In skittish European markets, the Stoxx 600 index dropped during the briefing, losing as much as 0.3%. European gas futures traded up 3.9% as of 2:05 p.m. in Amsterdam.
If member states act to meet demand-reduction targets, “Putin’s attempt to manipulate us will fail,” EU climate chief Frans Timmermans said at the press conference. “Europe as a whole is under his attack. A strong European response is the only response.”
A Russian gas cutoff in July would mean that EU stockpiles would be 65% to 71% full at the start of November, below the 80% target, the commission estimated. That indicates a gap of 30 billion cubic meters during the winter under normal weather conditions and continuously high liquefied natural gas supply, it said, warning that storage could empty out in several member states by next April.
Replenishing reserves next summer may also be challenging, with stockpiles in October 2023 potentially only reaching 41% to 56% full, according to simulations run by the commission.
The plan unveiled on Wednesday goes in the right direction, according to Simone Tagliapietra, a researcher at the Bruegel think-tank in Brussels.
“EU member states must now adopt the proposed gas demand-reduction targets and make comprehensive efforts to reduce demand wherever possible,” he said. “Governments must ask people to consume less and should have the courage to tell their citizens that Europe is in the midst of what possibly represents the greatest energy crisis in its history.”
