In what state of mind did you leave the extraordinary meeting of energy ministers on Friday that adopted
– It was really very intense. We managed to adopt three European legislative measures that make a lot of sense. Three measures that we managed to pass in a few weeks. We are finally going to tax the excess profits made by those who exploit oil and gas drilling, recycling the billions obtained to households and companies.
The latter will also see their bills fall thanks to the surplus revenue we will recover from producers in the wholesale electricity market whose marginal costs are much lower than the market cost. Finally, before the arrival of a winter that will see French nuclear electricity production falter a little, we have decided on a joint action to better manage consumption and reduce it during peak hours.
I managed to include a very important passage in the regulation. (...) It states that Member States that (...) import a lot of electricity have the right to use other budgetary resources to help their industries and SMEs.
This means €117bn through the taxation of super-profits of low-cost electricity producers and €25m through the solidarity contribution for the fossil fuel sector. But in Luxembourg, how much will this represent?
Given that we do not have any oil and gas drilling in Luxembourg, unfortunately we will not have any income at that level. On the other hand, on the electricity market, we have a number of wind turbines and large solar installations that are currently benefiting from very high prices. So they will be taxed. But it will only be small revenues (which should amount to about €10m in total, editor's note)...
However, for nations that import a lot of electricity like us, the text also provides a legal framework that will allow us to conclude a bilateral agreement with Germany, where the majority of our electricity comes from (70%), in order to achieve a fair cross-border distribution of revenue, in application of the principle of solidarity.
And then, two days before the European summit, I also managed to include a very important passage in the proposed regulation. A passage that was maintained in the final version of the text. It stipulates that Member States that obtain less revenue from this tax have the right to use other budgetary resources to help their industries and SMEs. Luxembourg companies will therefore not be disadvantaged compared to their neighbours.
It is important to note that the framework set at European level by the Directorate General for Competition, the framework that conditions all state aid to companies, will soon change.
Will this aid have to comply with current European legislation on state aid?
Yes, it will. But, at this level, it is important to point out that the framework set by the Directorate-General for Competition, the framework that conditions all state aid to companies, will soon change.
So the rules in force will change?
They are valid until the end of this year 2022. For the future, a public consultation was launched a fortnight ago by the Commission and the Directorate-General for Competition. It will end soon. Together with economy minister (LSAP) and SMEs minister (DP) we are already working on this dossier. And as soon as the texts are available, we will see how we can help our companies even better. The European Commissioner for Competition, Margrethe Vestager, is supposed to present the new framework on 15 October.
Coming back to Friday's meeting, the gas price cap was on everyone's lips before the summit. It is known that the Council has given the Commission a mandate to come back to it with concrete proposals in the next few days. But how did the negotiations go?
As I said in my introduction, it was intense, but in the end we came closer on all the issues related to lowering the price of gas and electricity. It is now clear that Europe must talk with countries outside the European Union. The Commission has been given a mandate to do so. For example, we need to talk to President Biden and the United States. A nation that is a game changer in this crisis because it has sufficient liquefied natural gas (LNG) capacity to help us next summer to refill our stocks for the winter of 2023-2024. Since we won't really be able to rely on much Russian gas then.
We also need to talk to other reliable suppliers. Like Algeria or Norway. We need to explain for example, to the Norwegians that they have always sold us a MWh of electricity at €20, before seeing prices rise to €250 or €300 recently and [discuss] if we could, for example, agree on an amount of between €80 and €120 euros. Finally, Japan and Korea are two other important players with whom we need to talk, given that they are in competition with the EU on these liquid gas deliveries.
We need to talk to President Biden and the United States. It is a nation that is a game changer in this crisis.
What is Luxembourg's position on the gas price cap?
We are not one of the nations (including Belgium and France) that signed the letter urging the Commission to set a ceiling, even if there are many elements in it that I agree with. On Friday we had a big discussion about what is a good idea, but also a bad idea. And even the signatories of the letter agreed that there are risks in capping the price of gas.
What would happen if a ship carrying our gas changed course because a competitor bid higher than us during the voyage? Or if, even in the space of half a day, the supply of gas on the market was no longer sufficient, because of the price offered, to satisfy all European demand? Who would decide which way the gas would go and who would not? The only thing that is certain is that we must continue to develop renewable energies and work to reduce overall gas consumption. Because no one knows whether there will be enough to satisfy everyone in the long run.
We are not one of the nations that signed the letter urging the Commission to set a ceiling, even if there are many elements in it that I agree with.
A mandate was also given to the Commission to move forward on a common gas purchasing platform...
Yes, we have made progress on this issue. In particular, a consensus has been reached between the seven countries that are the major buyers at European level--Germany, France, Spain, Italy, the Netherlands, Austria and Poland, which account for 70 to 75% of purchases--to set up this platform. This will be linked to the volume of gas we need to fill our stocks next summer.
Another idea is on the table, that of generalising the Iberian model for electricity (in Spain and Portugal, the wholesale price of electricity is artificially reduced by lowering the costs of inputs used in power stations powered by fossil fuels, editor's note). But there are still three or four questions that need to be answered before we can move forward. Like how to avoid leakage from the European market to the outside. Because this would mean that the prices for electricity in the EU would be more attractive than those in Norway, Great Britain or the Balkans.
This story was first published in French on . It has been translated and edited for Delano.