Brussels proposes temporary gas price cap to curb extreme prices

Brussels plans to propose an emergency mechanism to dampen the price of gas if it hits extreme levels while the EU tries to get a grip on the bloc’s energy crisis.

According to a draft proposal by the European Commission, the EU should be able to set a maximum “dynamic price” at which gas transactions can take place in the Netherlands Title Transfer Facilitya benchmark for gas traded in the block.

The goal is to empower the EU to intervene in extreme natural gas prices without compromising security of supply or encouraging consumption, the draft said, adding that an emergency cap should only last three months.

The draft proposal, presented to the Financial Times, came as member states prepared for a summit in Brussels on Thursday and Friday aimed at finding common solutions to contain the energy crisis. EU capitals are bickering over how best to work together to tackle rising energy prices, with the issue of capping gas prices proving particularly contentious.

The Commission’s proposals also include measures to limit volatility in energy derivatives markets and a longer-term project to create a new benchmark for LNG. The draft advocates urgent action to ensure member states collaborate more effectively on gas purchasing, with a particular focus on storage refills next year.

The plans stem from an extraordinary meeting of EU commissioners on Sunday and have yet to be discussed between member states ahead of a European Council meeting in Brussels on Thursday and Friday.

Germany, which has the largest gas market in the bloc, is among member states skeptical of the idea of ​​capping gas prices, fearing it could end up bolstering demand or undermining supply.

“There is no agreement between leaders on a price cap – it is very controversial,” an EU official said ahead of the weekend’s meeting. “Each shape of the cap would have different effects [depending] depending on where you are in Europe.”