Tax cuts, handouts and blind hope: Europe finds few tools to fight a coming energy crisis

DUBLIN — European energy officials highlighted handouts and tax cuts as the only viable ways to shield consumers from surging energy costs this winter — while hoping that U.S. President Donald Trump wouldn’t add fuel to the fire by banning American diesel exports.

At an informal gathering of European energy ministers on Tuesday in Dublin, the outlook was grim. Natural gas prices are at near four-year highs ahead of winter, European gas reserves are unusually low, and the ongoing conflict in the Middle East means the Strait of Hormuz remains shut indefinitely. Meanwhile, soaring diesel costs have prompted the U.S. to consider banning exports of the motor fuel, which would disproportionately affect Europe.

Ministers and EU officials said that harnessing Europe’s potential for renewables with deep upgrades to its grid and electricity markets was the only real way to bring down costs in the long-term. But in the short term, they talked up the benefits of financial support schemes to boost electrification and renewables uptake — many of which were already adopted in the wake of the first energy crisis this year.

“We see more EVs than ever sold in Europe now, we see electric heat pumps replacing gas boilers and oil boilers than ever before — so yes, there are actually a lot of positive things happening,” EU energy chief Dan Jørgensen told reporters in a response to a question from POLITICO. “Many times, one of the best things we can do in these situations that also works in the short term is active electrification.”

He added that he was “in no way implying that that is enough,” and there were “many big structural things that we need to do that will not help consumers tomorrow or even this year, but there are actually also things that member states can do.”

Irish Energy Minister Darragh O’Brien, whose government holds the EU’s six-month rotating presidency, also described the deployment of renewables as the main way to address rising costs, emphasizing that Dublin was working to hasten the adoption of a new EU law aimed at strengthening the bloc’s electricity grids.

But he said the EU’s ability to address the current rise in costs was limited.

“There are flexibilities that member states have at our disposal around taxation, but I think our citizens are aware that there’s no government in Europe that is going to be able to protect their citizens from every single price increase,” he told reporters. “The fundamental reason for that,” he said, was “our over-dependence in the European Union on imported fossil fuel.”

Discussions were dominated by the question of where responsibility for addressing rising prices ought to lie. Member countries called on the Commission to institute a windfall tax on energy companies making bumper profits, while the EU executive said it was up to individual countries to decide.

The same went for a call by Jørgensen last week for consumers to reduce fuel use; national capitals would rather wait for central guidance from the Commission, according to a European energy official familiar with member-country deliberations who, like others cited in this piece, was granted anonymity to speak openly.

Both O’Brien and Jørgensen also warned that it was important for such measures to be targeted and temporary to avoid uneven application that could distort the EU’s single market.

The despair over energy costs lent an experimental air to the closed-door discussions held in the imposing Dublin Castle in the city center. Officials discussed lowering electricity taxes, feeding surplus energy from electric vehicles back into national grids, and listened attentively when Ukrainian officials, invited alongside British, Norwegian and Moldovan delegates, offered to store European natural gas supplies on behalf of the bloc in its vast underground caverns, Moldova’s energy minister, Dorin Junghietu, told POLITICO.

Junghietu added that Europe needed “quick, tangible results” to bring down costs. He said the best way to do this was to make it easier and cheaper to invest in household renewables like solar, but acknowledged that this would be difficult in countries where deeper, structural changes to grids are necessary.

The EU’s helplessness was apparent when officials were pressed on whether the EU was prepared for a possible U.S. ban on fuel exports, after Trump appeared to endorse the idea earlier this month. Ministers largely expressed hope that such a ban wouldn’t happen, while urging Washington to rethink.

Jørgensen told reporters he sent a “clear signal” to his U.S. counterpart, Chris Wright, that the U.S. ought to retreat from the threat, and said he was happy to see Wright publicly agree that it wouldn’t work. O’Brien said conversations with U.S. officials during a visit to Washington and New York last week had reassured him that the plan wouldn’t go ahead.

A third European energy official said there was “not much we can do … in the short term in terms of oil prices,” but that he hoped the ban wouldn’t materialize. “The Americans are pragmatic people,” the official said. “It’s all about the money — if they put a ban on diesel exports, it might work for Texas, but it wouldn’t work for other parts of the U.S.”

On Tuesday, POLITICO reported that U.S. oil industry executives and White House officials were seeking alternatives to Trump’s proposed diesel export ban. Options could include asking European governments to release diesel from their own strategic reserves, according to two people familiar with the discussions who were granted anonymity to discuss conversations with the White House.

European officials acknowledged that it was ultimately in Trump’s hands — and that there was little individual member countries could do to sway the U.S. president if it did go ahead. For “one particular member state, [it] will be extremely challenging to change a decision over the option,” said state secretary for energy Cristian Busoi. “Trying to guess what Trump will do is like looking at a crystal ball,” added the official cited above.

That’s not to say there are no options available for the EU. Fatih Birol, executive director of the International Energy Agency, a group of rich countries that coordinates energy policy, who was also present at the Dublin talks, acknowledged that Europe was “one of the most exposed regions.” But he said that the IEA stood ready to coordinate the release of strategic petroleum stocks, while cautioning that such a move wasn’t a priority — yet.

“Our reserves are in good order,” added O’Brien in a separate interview. “There’s no fear of an issue with regard to the depletion of reserves at this stage. What we do know is we have to plan for the worst and hope for the best.”