The EU responds to Ribera: the problem of the price of electricity is not CO2 rights

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The Vice-President of the European Commission, Frans Timmermans, disagrees with the Spanish Government that the problem of the rise in the price of electricity is CO2 rights. As explained by the Dutch, promoter of the Green New Deal, the increase in the electricity bill is due to the prices of the gas markets and not to these emission rights that were designed to penalize polluting energies and accelerate decarbonization.

“What is happening is the price of gas. Many talk about CO2, but the wholesale market prices have five times more impact on consumers than CO2,” Timmermans explained to a group of Spanish journalists with whom gathered in the European Parliament of Strasbourg.

The commissioner has referred to the problem in Spain and has shown his support for the Government in the search for solutions to lower the price of consumer receipts. But it will not respond to the request to reformulate CO2 rights at this time to respond to a problem that it considers temporary, such as the rise in gas.

As explained, the European Commission has already responded to a letter sent by the third vice president, Teresa Ribera, to establish his position on this matter and he himself met with her a few days ago to study the situation.

High gas prices

But Timmermans considers it rash to raise a wholesale market reform right now. The executive vice president is confident that gas prices will fall next year and the impact that their increase has had on the rise in the bill for European consumers in recent months will be mitigated.

In this sense, it has recognized that Spain has a particular problem because it has “more contracts linked to the short term” than other EU countries that have their consumers with contracts negotiated for the “long term”, which protects those users from market fluctuations.

Timmermans has also assured to be informed of the measures that the Spanish Government approved this Tuesday in the Council of Ministers to contain the rise in the electricity bill, but has not entered to assess them in the background.

What it has said is that the effort that Spain has made in recent years to invest in renewable energy will bear fruit and will allow energy prices to be reduced in the medium term.

The carbon problem

The position of Brussels coincides with a recent study by the consultancy Human, which ensures that the increase in energy prices in Europe is mainly due to rising fossil gas costs, not carbon prices.

Evolution of CO2 and gas prices

Evolution of CO2 and gas prices

In fact, they say that the record high energy prices in the European Union countries show that the bloc must abandon fossil fuels and accelerate the transition to green energy.

CO2 speculation

The price evolution of European CO2 emission rights (ETS EU) has tripled in the last year, from more than 20 euros / Tn to more than 60 euros today.

Unfortunately, CO2 has become a financial asset It is attended by all market operators but also investment funds seeking hedging, others who speculate and others who know that it is a safe value, because it only has one way, that of continuing to rise.

“It is true that CO2 has a lot to do with the price of the electricity bill, firstly because it expels coal from the market, which is what it has done last year and gives way to gas, but since gas also has to pay rights of emission, adds to the high prices of this raw material in the international market “, explains to Invertia Javier Colon, manager of the consulting firm Neuro Energy and an expert in the electricity market.

According to Bloomberg BNEF, a fund of BNP Paribas Asset Management, the BNP Paribas Energy Transition, exemplifies what is happening in the ETS EU. Some of its operations in the European CO2 market have allowed it to obtain profits of more than 100%.

“The future scenario makes it difficult to think that the price of CO2 will fall”, continues the expert.

“And now it is confirmed by the European Commission, which does not see any problem with this market and, in addition, wants to increase the rate of withdrawal of free allocations from the market (Market Stability Reserve), which will further reduce those that are on the market, “concludes Colón.

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