Explanatory Memorandum to COM(2022)361 - Coordinated demand reduction measures for gas - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2022)361 - Coordinated demand reduction measures for gas. |
|---|---|
| source | COM(2022)361  |
| date | 20-07-2022 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Over the past year, supplies of gas from Russia have had a series of disruptions that can only be explained by a deliberate attempt to use energy as a political weapon. Russia has been for many years the main gas supplier of the EU. Last year, the EU relied on Russia for more than 40% of its gas supplies. The supply of gas has continuously decreased since the start of the war. The pipeline flows of gas from Russia are less than 30% of the average of the previous years. Twelve Member States have activated the first or second crisis level pursuant the common EU classification. This supply shock has already significant impacts on the price of gas, on the price of electricity, on inflation, on the overall EU financial and macroeconomic stability, and on all citizens.
There is no reason to believe this deterioration of gas supply will stop. The EU is today facing the realistic prospect of a full and protracted disruption of gas from Russia at any moment. It must be prepared for it and take pre-emptive actions to mitigate the impacts of possible major supply disruptions.
The EU has invested sustained efforts into improving the overall security of supply situation of the Union in the past decade, in particular focusing on diversification through infrastructure development, as well as the strengthening of the gas security of supply framework. While the current framework has been conceived and been successful in addressing short-term disruptions and extreme weather events, it remains inadequate to deal with highly uncertain supply prospects and major sustained cuts in supply.
In reply to the heightened risk for the coming winter, the EU has considerably reinforced its immediate preparedness for such a major supply disruption the last few months: it has fully taken advantage of the possibilities provided by the current legal framework, it has introduced measures to incentivise the refilling of storage, established the EU Energy Platform to support diversification of gas supplies and announced, as part of the REPowerEU plan of 18 May 2022, the goal to end the dependency on Russian fossil fuels as soon as possible. In its resolution of 7 April 2022, the European Parliament called for a plan to continue ensuring the Union’s security of energy supply in the short-term to be presented. The EU leaders in the European Council subsequently asked on 31 May and 23 June 2022 to improve preparedness for possible major supply disruptions as a matter of urgency with a view to securing energy supply at affordable prices.
In view of possible further supply cuts by Russia and building on the need for the EU to jointly address these new challenges, further reductions of gas demand are crucial to avoid far-reaching negative consequences for citizens and the EU economy. The proposed Regulation creates an improved coordination framework for national gas demand reduction measures. It also introduces a possibility for the Commission to declare a new Union crisis level, namely a ‘Union alert’, triggering a compulsory Union-wide demand reduction obligation and aiming to safeguard security of gas supply. The commitment of all Member States to reduce gas demand by measures of their own choice in case of a further deterioration of the supply situation leading to a Union alert is key to prevent the significant economic harm stemming from further supply disruptions. Joint and well-coordinated demand reductions can significantly reduce the risk of curtailment of industries that are crucial for the EU supply chains and the EU’s competitiveness in case of a major supply disruption. As set out in the Communication “Save Gas for a Safe Winter” of 20 July 2022, it is much cheaper for citizens and industry to act now to reduce demand rather than face uncoordinated curtailments later.
The amount of the necessary demand reduction volumes which will reduce the impact of the supply disruption but not avoid all negative impacts, should consider the volumes of gas demand which could be at risk in case of a full disruption of Russian gas supplies. These volumes can be distributed amongst all Member States, based on a comparison with their average consumption over the last 5 years.
With a view to avoiding the significant distortions of the internal market which are likely to occur if Member States react in an uncoordinated manner to a potential further Russian supply disruption, it is crucial that all Member States act jointly and in a spirit of solidarity as soon as possible. While some Member States may be more exposed to the effects of a disruption of Russian supplies, all Member States will be negatively affected and can contribute to limit the economic harm of such disruption. This proposal therefore reflects the principle of energy solidarity, which has recently been confirmed by the Court of Justice as a fundamental principle of EU law 1 . Member States which make all efforts to cope with the gas shortage within their territory should be entitled to fully benefit from the energy solidarity of their neighbours.
However, as certain Member States are not able to free up significant volumes of pipeline gas to the benefit of the Union, due their specific geographical or physical situation, such as missing or low pipeline interconnection to other Member States, the proposal includes the possibility for those Member States to apply for a limitation of their mandatory demand reduction obligation.
• Consistency with existing policy provisions in the policy area
The proposed instrument sets out temporary, proportionate and extraordinary measures. It complements existing relevant EU initiatives and legislation, which ensures that citizens can benefit from secure gas supplies and that customers are protected against major supply disruptions.
It flows logically from existing initiatives, such as the “REPowerEU”, the proposal for a Hydrogen and Gas Market Decarbonisation Package 2 and the “Save Gas for a Safe Winter” initiative. The proposed initiative is fully complementary to the EU legislation on security of gas supply, which already established a comprehensive set of rules to better protect citizens and companies against supply interruptions. Regulation (EU) 2017/1938 introduced, inter alia, emergency plans whereby Member States are required to prepare for different crisis levels and plan for measures that can be taken in the event of a national alert. Solidarity mechanisms are also in place, ensuring that Member States cooperate across borders to ensure that energy is provided to those customers in a region who need it most, in case of supply disruptions. The Commission’s proposal for a Hydrogen and Gas Market Decarbonisation Package includes further measures to enhance preparedness against supply disruptions.
Following the Russian invasion of Ukraine, the EU has set out the REPowerEU Plan with the aim to end the EU's dependence on Russian fossil fuels, as soon as possible and at the latest by 2027. To achieve this, the REPowerEU Plan sets out measures related to energy savings and energy efficiency, and proposes an accelerated roll-out of clean energy to replace fossil fuels in homes, industry and power generation. In this context, the proposed initiative builds on the tools the EU already has at its disposal and is fully consistent with the goals set out in REPowerEU.
The Commission’s proposal for a Hydrogen and Gas Market Decarbonisation Package 3 includes further measures to enhance preparedness against supply disruptions, notably by revising the Regulation (EU) 2017/1938. In addition, the recently adopted Storage Regulation (EU) 2022/1032 4 introduced storage obligations in response to the Russian invasion of Ukraine, in which supply shortages and price peaks can result not only from the failure of infrastructure or extreme weather conditions, but also from geopolitical changes, leading from longer lasting or sudden supply disruptions. The storage filling obligations in Regulation (EU) 2022/1032 contribute to safeguarding security of gas supply for the winter of 2022–2023.
The existing gas security of supply rules are, however, not fully adapted to security of supply challenges of the nature and magnitude we are currently facing, where immediate preparedness becomes essential in order to avoid severe economic and social consequence of major supply disruptions. On 31 May and 23 June 2022 the European Council, in its conclusions, therefore asked for the preparation for further gas supply disruptions to be carried out as a matter of urgency and in particular to enable closer coordination with – and between - Member States.
The “Save Gas for a Safe Winter” Communication adopted on 20 July 2022 sets out the tools that Europe already has available for a coordinated demand reduction, and what else needs to be done, so that Europe is ready for full or partial disruptions. The proposed initiative responds to the increased risks resulting from Russia’s war against Ukraine, and is fully complementary to the existing security of supply rules. It sets out new rules for coordinated demand reductions and introduces a new Union alert. Indeed, while there is already the possibility for the Commission to declare an emergency at Union level, there is currently no possibility under existing legislation to declare an alert at Union level. However, the current situation shows that such alert may be useful to ensure that all Member States take the necessary preventive measures to avoid an energy emergency.
This proposal for an instrument, enabling coordinated crisis preparation by introducing better coordination rules for demand reductions and by creating the possibility to introduce Union-wide mandatory gas demand reductions is therefore complementary to the existing instruments, safeguarding the security of gas supply and ensuring coordination between demand reduction measures across the EU.
• Consistency with other Union policies
The proposal is an extraordinary measure, to be applied for a limited time, that is consistent with a broader set of initiatives to enhance the Union’s energy resilience and to prepare for possible emergency situations. The proposal is also fully compatible with competition and market rules, as functioning cross-border energy markets are key to ensure security of supply in a situation of supply shortages. Appropriate rules in the proposal ensure that national measures do not hamper competition or compromise the integrity of the internal market. Providing for more coordinated demand reductions, it is also in line with the Commission’s Green Deal targets.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this instrument is Article 122(1) of the Treaty on the Functioning of the European Union (‘TFEU’).
The current shortage of gas supplies constitutes a severe difficulty in the supply of an energy product pursuant to Article 122. EU leaders and Commission have identified the urgent need for additional measures for more coordinated action already during the summer months, in order to be better prepared for possible further gas disruptions in the coming winter. The measures under the instrument allow all Member States to prepare for possible further supply shortages in a coordinated manner. It is therefore justified to base the proposed instrument on Article 122(1) TFEU.
• Subsidiarity (for non-exclusive competence)
The planned measures of the present initiative are fully in line with the subsidiarity principle. Because of the scale and the significant effect of further cuts in gas supply on the part of Russia, there is a need for EU level action. A coordinated approach through Union-wide demand reduction, in the spirit of solidarity, is necessary to minimise the risk of potential major disruptions during the winter months when gas consumption will be higher and where Member States will need to partly rely on the gas stored during the injection season.
Given the unprecedented nature of the gas supply crisis and its transboundary effects, as well as the level of integration of the EU internal energy market, action at Union level is warranted as Member States alone cannot sufficiently effectively address the risk of serious economic difficulties resulting from price hikes or significant supply disruptions in a coordinated manner. Only EU action motivated by a spirit of solidarity between Member States can ensure that supply disruptions do not lead to lasting harm for citizens and the economy.
By reason of its scale and effects, the measure can be better achieved at Union level, hence the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union.
• Proportionality
The initiative complies with the proportionality principle. It falls within the scope of Article 122(1) TFEU. The policy intervention is proportional to the dimension and nature of the problems defined and the achievement of the set objectives.
In view of the unprecedented geopolitical situation and the significant threat for citizens and the EU economy, there is a clear need for coordinated action. Hence, the proposal does not go beyond what is necessary to achieve the objectives laid down in the current instrument. The proposed measures are considered proportionate and build to the extent possible on existing approaches, such as the existing crisis levels and emergency plans established in accordance with Regulation (EU) 2017/1938.
This proposal sets the final result to be achieved, in the form of process for setting a legally binding energy reduction obligation for Member States, while giving Member States full autonomy in choosing the most effective means to meet such obligation according to their national specificities and the measures already foreseen in the national emergency plans.
• Choice of the instrument
Taking into account the dimension of the energy crisis and the scale of its social, economic and financial impact, the Commission deems suitable to act by way of a regulation which is of general scope and directly and immediately applicable. This would result in a swift, uniform and Union-wide cooperation mechanism.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Stakeholder consultations
Due to the politically sensitive nature of the proposal and urgency to prepare the proposal so that it can be adopted on time by the Council, a stakeholder consultation could not be carried out.
• Fundamental rights
No negative impact has been identified on fundamental rights. The measures under this instrument will not affect the rights of customers who are categorised as protected under Regulation (EU) 2017/1938, including all household customers. The instrument will enable to reduce the risks associated with gas shortage that would otherwise have major implications on the economy and society.
4. BUDGETARY IMPLICATIONS
This proposal does not require additional resources from the EU budget.
5. OTHER ELEMENTS
Not relevant.