European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, September 28, 2022. (YVES HERMAN / REUTERS)
BRUSSELS — European Union countries will try on Tuesday to agree an EU-wide cap on gas prices, after months of talks that have so far failed to break the deadlock between governments at odds over whether the measure will ease Europe's energy crisis.
Energy ministers from 27 member countries meet in Brussels to attempt to approve a price cap proposed by the European Commission last month – the latest EU response to an energy crunch caused by Russia slashing gas deliveries to Europe this year, leading to severe price spikes.
The pro- and anti-cap camps of countries each potentially have enough votes to block a deal
"Probably not one member state is happy with the proposal we are discussing," said one senior EU diplomat, who described the gas price cap as "one of the most complicated and difficult files you can imagine".
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Countries including Belgium, Poland and Italy say a cap is needed to shield their economies from high energy prices, while Germany, the Netherlands and Austria fear it could divert much-needed gas cargoes away from Europe.
Other EU diplomats said they were not sure if there would be a deal on Tuesday. One option could be to escalate the talks to a meeting of EU country leaders on Thursday, and then try again to have ministers approve the price cap next week.
Any deal could rest on technical details including how high the price limit is, which gas contracts it applies to, and safeguards such as enabling the EU to immediately suspend the cap if it has unintended consequences.
"We are moving in the right direction but we are not there yet," another senior EU diplomat said.
A draft compromise that countries discussed over the weekend would trigger the cap if prices exceeded 220 euros per megawatt hour for five days on the front-month contract in the Dutch Title Transfer Facility gas hub, and were also 35 euros higher than a reference price for liquefied natural gas (LNG) based on existing LNG price assessments.
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That limit is below the 275 eur/MWh limit proposed by the European Commission, but a dozen countries including Greece and Italy want an even lower cap.
The pro- and anti-cap camps of countries each potentially have enough votes to block a deal. A potentially decisive nation is France, which initially backed a price cap but last week expressed concerned over the potential fallout in financial markets, three EU country diplomats said.
Last week the Intercontinental Exchange warned the EU proposal could in fact drive gas prices higher, while the European Central Bank said it may jeopardise financial stability.
READ MORE: IEA: Europe could risk gas shortage in 2023
The EU has already agreed a raft of emergency energy measures this year, including gas storage filling requirements. But the cap may also decide the fate of other EU energy policies – including faster permits for renewable energy projects – after countries opted not to approve those files last month without a deal on the gas price cap first.