6 billion extra oil bill for Europe from the Iran war

The closure of the Strait of Hormuz and attacks on gas and oil facilities have raised the price of crude oil and natural gas to the highest level in years.

According to the European Commission, since the start of the conflict, the EU has spent more than six billion euros extra on fossil fuel imports. According to the Commission, the amount is a stark reminder of how dependent Europe still is on oil and gas.

The situation also speaks to the leaders gathered in Brussels for the EU summit on Thursday. They will have to think about the best ways to protect the Union from the economic effects of the US-Israeli war against Iran.

According to the draft resolution of the meeting, the leaders of the EU countries intend to call on the Commission to immediately prepare “a toolkit of targeted temporary measures to combat price spikes in imported fossil fuels”.

In addition, the leaders plan to call for a review of the Emissions Trading System (ETS) “by July 2026 at the latest” to ease price pressure on European industry.

Chairman of the Commission Ursula von der Leyen already promised the EU leaders before the meeting that the commission would propose changes to the emissions trading system. He promised measures that would secure industry’s free emission allowances, curb fluctuations in the price of emission allowances, and direct the auction income of emission allowances to industry.

President of the European Council Antonio Costa on the other hand, emphasized on Thursday that the situation in the Middle East reminds us how important it is for Europe to break away from fossil energy.

Member countries divided

Finland is one of the pioneer countries in clean technology in the EU and defends emissions trading as an effective climate measure.

Prime minister Petteri Orpo (kok) said in Brussels that the EU’s emissions trading is the cornerstone of climate policy and industrial policy.

“For example, in Finland we have invested billions in clean energy production and new technologies, and today we see that the price of energy is low and industry invests in clean production because we have clean energy.”

Orpo emphasized that the EU must continue to move away from fossil energy.

“But at the same time, we have to find a balance so that we can help and support countries that suffer from high energy prices,” Orpo said.

However, EU countries suffering from high energy prices and industrial costs would like to relax the terms of the emission trading.

Before the summit, ten member countries sent a letter to the Commission, in which they asked to speed up the future emissions trading review.

Poland, the Czech Republic, Slovakia, Romania, Greece, Hungary, Italy, Bulgaria, Austria and Croatia demand that the Commission review the system again by the end of May at the latest. According to the countries, the emissions trading system damages their industry and raises energy costs.

Quick actions

On Thursday evening, the deputy finance ministers of the EU countries will also discuss in Brussels how the member states can practically protect themselves from the economic effects of the energy crisis.

The commission has already drawn up a list, which, according to media reports, includes, among other things, the reduction of electricity taxes and fees and the provision of financial relief to households and businesses in difficulty. On the other hand, the easing of EU public spending rules is out of the question for the time being, because there is not yet an EU-wide financial crisis.

The Commission has also emphasized the temporary nature of possible measures.

During the 2022 energy crisis, the EU gave member states the opportunity to use, among other things, price ceilings, subsidies paid to producers, and direct subsidies to households and companies.

However, the Commission emphasizes that the treatment of the energy crisis cannot be limited to short-term measures, because a permanent decrease in the price of energy requires structural changes. They focus especially on production costs, network fees, taxes and carbon costs that affect the price of electricity.