BRUSSELS — The European Commission will push ahead with emergency measures to tackle the energy crisis, including a windfall tax on some energy companies and binding targets to reduce energy consumption during peak hours, a sign of growing concern that the fallout from Russia’s war in Ukraine is pushing the region toward recession.
The plan, outlined in European Commission President Ursula von der Leyen’s annual “State of the European Union” address on Wednesday, comes after weeks of debate about the best way to tackle high energy prices. It does not include a price gap on gas — something that the commission floated but proved divisive.
“Russia keeps actively manipulating our energy market,” von der Leyen told members of European Parliament gathered in Strasbourg, France. “This market is not functioning anymore.”
The annual speech comes more than six months after Russia launched its full-scale invasion of Ukraine, upending Europe’s post-Cold War security architecture and its energy strategy. The 27-member bloc moved with uncommon speed and unity, pulling together to hit the Kremlin with unprecedented sanctions and offering financial and military support to Ukraine.
But the European Union’s efforts to hit Russia’s war machine have accelerated Europe’s energy and cost-of-living crisis, sending the price of electricity, as well as food and other essentials, way up. There is a growing fear that Europe is heading for a recession that could lead to social unrest in the region and ripple around the world.
In recent weeks, E.U. officials have held urgent meetings on measures to control the price of electricity and stabilize power markets, with the commission floating a range of ideas that would have once been considered extreme. The European Central Bank last week raised interest rates for the second time this year in a bid to cool off inflation without pushing the economy over the edge.
The White House is watching the situation closely. Aides to President Biden have been reviewing their efforts to export liquefied natural gas to Europe, to determine whether there’s any additional way for American producers to help. In a visit to Brussels last week, Secretary of State Antony Blinken vowed the U.S. will not “leave our European friends out in the cold.”
Since February, the European Union has taken steps to wean itself off Russian energy in the name of limiting Russian revenue and loosening the Kremlin’s grip on Europe. To some extent, it appears to be working.
Russian pipeline gas now makes up just 9 percent of E.U. gas imports, for instance, not the 40 percent it was at the beginning of the year. The E.U. last week reached its goal to get gas stores to more than 80 percent well before the weather turns in November.
In the short term, however, prices remain high and national governments are paying hundreds of billions to try to keep people afloat.
“Reducing demand during peak hours will reduce demand and it will bring prices down,” von der Leyen said Wednesday, referring to her proposal for mandatory power curbs during peak hours.
She justified the proposed windfall tax by noting that while profits are good, in these times, “must be shared and channeled to those who need it most.”