Europe needs both fiscal and energy solidarity

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Publication Date March 2023
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Putin’s invasion of Ukraine raised energy prices and, in response, European governments subsidised electricity and gas consumption. The European Commission developed the REPowerEU plan to cut Russian gas out of the EU market. That plan involved energy saving targets, more imports of pipeline gas and liquefied natural gas (LNG) from countries other than Russia, and more renewable energy. The authors predict that European manufacturers’ competitiveness would be undermined without a rapid shift to cheaper and cleaner fuel sources. The best way to achieve that shift was unlikely to be US-style production subsidies for green tech producers. The US Inflation Reduction Act was prompting the EU to consider its own subsidies for green tech producers. Instead, cheap finance for zero-carbon energy infrastructure was needed, since many of the key technologies needed to curb gas consumption were nearing maturity. They argue that the EU should establish a climate fund to speed the energy transition, and finance it with joint borrowing, building upon the success of the NextGenerationEU fund.

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EPRS briefings: PE 739.362: EU energy security and the war in Ukraine
European Commission: COM (2022) 547: State of the Energy Union 2022

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