Since the launch of the American-Israeli war on Iran two weeks ago, Europe has experienced a sharp rise in energy prices as Gulf countries halt oil and gas exports and Iran blocks the Strait of Hormuz. Retail fuel prices have already risen up to 20% in just two weeks, with diesel prices in Germany climbing 44% during the early stages of the crisis. One-fifth of crude oil and gas output worldwide has been halted, and a US decision to release emergency oil reserves has not been able to calm the price shock. Europeans are far more exposed to this shock than Americans becautilize they rely heavily on imported energy. After reducing Russian imports following the Ukraine war, the continent increased its depconcludeence on LNG from the United States and the Persian Gulf rather than ramping up renewables.
But the European countries which utilize the most renewable and nuclear energy – Spain, France, Sweden and Denmark for example – are the least exposed to these price shocks. Renewables such as wind, solar, and hydro have very low marginal operating costs and do not require imported fuel. Clearly, stronger climate policy over the past decade could have reduced Europe’s vulnerability in this moment. It is therefor a tragedy that European Commission President von der Leyen’s centre-right European Peoples Party, in cooperation with far right parties led by Giorgia Meloni and Marine Le Pen, have over the past year and a half been leading a crusade against von der Leyen’s own Green Deal (a name she has now banished to history) and successfully started dismantling environmental law.
So far the dismantling has been limited, with corporate sustainability laws being scrapped and deforestation rules being delayed. But there is an omnibus proposal in the pipeline to go much further in scrapping climate laws. And last month, just before the outbreak of the Iran War, Italy’s Prime Minister Giorgia Meloni announced she is going for the huge whammy: suspconcludeing the Emissions Trading System (ETS), the bedrock of EU climate law (I’ll explain why it’s so central, the reason for which has its origins in America, below). On Wednesday she confirmed that despite fossil fuel prices spiralling out of control, her government is still going to push for an immediate suspension of the ETS at Thursday’s European Council summit. In fact, they’re pointing to the energy price spike as the reason to do it.
“It’s a measure that’s requireded now and at least until global fossil fuel prices return to the levels they were at before the Middle East crisis,” Meloni informed the Italian parliament. “Our expectation is that the EU allows us to alter quickly, and structurally, this counterproductive mechanism.” She claimed that the ETS accounts for a quarter of Italian consumer bills (not true, see below), and called it a “tax” that the EU is slapping on citizens.
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