The EU is planning an emergency measure to curb soaring energy prices caused by the Iran conflict.
The EU has announced a roadmap to regulate the carbon market and increase industrial subsidies in response to the €6 billion increase in fuel import costs following the Iran conflict.
European Commission President Ursula von der Leyen has announced that the European Union (EU) will implement emergency measures to mitigate the impact of soaring energy prices. This move comes as the conflict in Iran puts significant pressure on global fuel markets, even though the bloc has not yet implemented a gas price cap.
Regulating the carbon market and increasing financial support.
In a letter to EU leaders ahead of the summit in Brussels on March 19, von der Leyen proposed a roadmap focused on increasing the supply of carbon emission permits. The goal of this plan is to cool energy prices in the short term through a carbon market-based reserve mechanism.
In addition, Brussels plans to increase financial support for industries and allow member states to increase state subsidies. This is aimed at protecting businesses from rising electricity bills due to fluctuating carbon and fossil fuel prices.
Economic impact and import cost pressures
According to data from the European Commission, the bloc's oil and gas import bill has increased by 6 billion euros since the conflict broke out on February 28. Gas prices in the European market have also seen a surge of over 50% in a short period, putting significant pressure on the region's economy.
Nevertheless, von der Leyen affirmed that the EU's supply security remains assured. Currently, the majority of the bloc's oil and gas supplies are imported from the US, Norway, and other alternative sources, mitigating the direct risks from disruptions in the Middle East.
The divergence of views among member states.
The new proposals are attempting to balance conflicting viewpoints within the EU. While Italy supports suspending the carbon market to reduce energy costs, countries like Sweden and the Netherlands oppose weakening this climate policy tool.
Notably, several energy officials, including Wojciech Wrochna from Poland, warned that the market needs stability and that abrupt regulatory changes should be avoided. To address long-term concerns, the EU may introduce a more realistic emissions reduction roadmap for the period after 2030 instead of tightening the supply of permits too quickly.
Looking back at the 2022 energy crisis, EU countries had to spend more than 500 billion euros to support the market, with Germany alone contributing 158 billion euros. Experts from the Bruegel Institute warn that increasing national support now could widen the economic gap between rich and poor member states in the bloc.
