By Belgian journalist Lode Goukens
In a new report, the European Court of Auditors has criticised the European Union’s joint purchasing of gas. In 2022, during the energy crisis due to Russia’s invasion of Ukraine, the EU Council decided to undertake massive joint gas purchases. According to the auditors of the European Court of Auditor, this did not yield any benefits.
The institution makes this clear in a new report, published on 24 June. The 60-page document is downright scathing. An important European Union institution such as the European Court of Auditors typically expresses itself extremely diplomatically and does not really put anyone to shame. When the title then reads “Leakages remain in the EU’s gas supplies” and the subtitle “The EU did initiate crisis-response measures, but their impact often cannot be demonstrated”, an insider knows there is dynamite in the report. One only then needs to read the report thoroughly and filter out the veiled criticisms.
Just a reminder. In 2022, gas prices shot up. In August 2022, wholesale gas prices reached a record high of 339 euros per megawatt-hour (up from 51 euros in August 2021). Up to six times the price in other words. Member states took all sorts of measures. For instance, subsidising their citizens’ gas bills. As much as 390 billion euros in subsidies in 2022 alone.
Panic struck. Governments bought up natural gas at crazy prices to fill stocks, driving up prices even more. Those prices were subsequently reflected in the gas bills and settlements of households and companies.
The changes in natural gas prices in Belgium were among the highest in the EU.
The European Court of Auditors’ auditors found that the EU’s contribution did not make a significant difference. They also noted that solidarity between member states and the regulations surrounding it left much to be desired.
Top stories of the week
Auditors question EU’s gas crisis response, joint purchaseshttps://t.co/PHtNYUIpVb— Euractiv (@Euractiv) June 29, 2024
The main criticism in brief: an uneven approach and no demonstrable achievements.
The conclusions in brief with plus or minus behind them to indicate positive or negative appreciation: short-term measures (-), unclear benefits (-), diversification of gas supplies (+), investment in infrastructure (+) and affordability lost sight of (-).
The four recommendations:
- Complete the EU gas affordability framework.
- Optimise the reporting process by member states on gas supply security.
- Review the structure of regional cooperation.
- Improve transparency in the implementation of PCIs (projects of common interest).
Meanwhile, gas prices have stabilised. But they remain permanently high. Up to five times higher than in the United States as noted last weeks by the top executive of British petrochemical giant Ineos in a noted interview with Bloomberg.
All in all, the EU escaped disaster. The auditor who took the lead in drafting the report is critical. ‘We were lucky that no serious gas shortage occurred’ said João Leão. Although there appeared to be enough gas, the EU failed on two accounts, according to Leão: Affordability and long-term planning. That affordability turned out not to be a priority was already clear.
What is particularly remarkable is that this turned out to be an announced energy crisis. ‘The Commission knew as early as 2014 that cutting off Russian gas would have a huge impact on prices‘ the auditors told the press conference ‘never were the effects on consumers and industry modelled’. The EU was not prepared despite Russia’s annexation of Crimea in 2014.
A striking criticism is about the EU’s complacency. For instance, with the best will in the world, the EU can never link the reduced use of gas to the EU’s actions. Recall that the EU decided to reduce consumption by 15% during one of the many Energy Councils in Brussels. The only logical explanation for the drop in consumption is that consumers and businesses reacted to skyrocketing prices.
Important interview: @INEOS founder Sir Jim Ratcliffe discusses the terrible state of Europe's chemical industry, points out the energy cost in Europe is 5 times higher than in USA, says @vonderleyen & @alexanderdecroo "are listening but I have not seen any changes". https://t.co/Mu6bcXUwy4
— Pieter Cleppe (@pietercleppe) June 19, 2024
On another note, the famous gas stocks for winter are hardly any different from what happened before. Apart from expensive panic buying.
This of course puts a bomb under the common buying mechanism set up by the European Commission. That mechanism, with its glowing name AggregateEU, got a hefty slap on the wrist from the auditors. They almost call it a ‘pet project‘ of European Commissioner Maroš Šefčovič (picture). Useless and opaque.
‘No added value‘ sounded the verdict. Normal market forces solved the problem and of the so-called ‘failing market’ that the Commission and energy ministers were skirting in 2022, the auditors could not find the slightest evidence.
Because the European Commission has no insight into the contracts of market players, they also have no insight into the impact of their own policies.
Ironically, though, the supply of gas for the joint purchase was three times the demand. So the gas companies stood by for the joint purchases supposedly at ‘more advantageous’ prices. Obviously prices much higher than on the world market.
According to the Court, the EU is not prepared for a (new) energy crisis. Even despite the fact that neighbouring countries are obliged under EU law to share gas supplies with each other if shortages were to occur somewhere. Despite those regulations, member states set up bilateral agreements. The Germans in particular set up solidarity contracts with their neighbours. Without much success, by the way.
Auditors note that the old gas market is dead. Instead of gas from Russia, gas now comes in mainly through LNG terminals. In the North Sea, in the Baltic Sea, through the Atlantic coast and into the Mediterranean. That change did not re-evaluate the risks. Something the Court notes delicately.
That does not enumerate all the woes. Member states are failing to report to the EU. Before the energy crisis in 2022, no fewer than 18 member states were found not to have fully transmitted their reporting on gas supply security to the EU. Two member states had not even reported anything at all.
Belgium also did not complete the reporting and was therefore one of those 18 countries. After 2020, Belgium under green energy minister Tinne Van der Straeten did not even submit anything at all. Belgium has a preventive action plan from 2019, an emergency plan from mid-2020 and a Commission opinion also from 2020. After Van der Straeten was sworn in on 1 October 2020, Belgium no longer did any mandatory reporting to the European Commission.
In addition, the Court concludes that the EU architecture for security of supply remains incomplete.
The Court’s advice is therefore that member states should at least get their plans and reporting in order. According to João Leão, it is clear: “Given its dependence on foreign gas, the EU should never rest on its laurels when it comes to security of gas supply. Moreover, consumers have no affordability guarantee in case of a major shortage in the future.’
The logical conclusion that the Court does not make is that billions of euros of taxpayers’ money were wasted and that, moreover, households and businesses bore the brunt of this through higher gas bills (despite subsidies to keep prices down) and the drastic reduction in gas consumption.
Originally published in Dutch on videbimus.be
Disclaimer: www.BrusselsReport.eu will under no circumstance be held legally responsible or liable for the content of any article appearing on the website, as only the author of an article is legally responsible for that, also in accordance with the terms of use.
