EU Faces Divisions Over How to Cut Energy Prices
European leaders are preparing to debate new ways to lower electricity prices at a summit later this month, as governments face growing pressure from industry over high energy costs.
Among the options being discussed are proposals to further decouple electricity prices from gas markets and address the growing number of periods with negative power prices — when electricity supply is so high that producers effectively pay consumers to take power from the grid.
The debate has gained urgency as geopolitical tensions push up energy costs. Following the escalation of conflict in the Middle East, gas-fired electricity prices in the EU have risen by around 51%, highlighting the risks of relying heavily on imported fossil fuels.
However, divisions are emerging among member states over whether Europe’s electricity market should undergo major reform.
Seven EU countries, including the Netherlands and Sweden, have warned the European Commission against interfering with the current system that sets wholesale electricity prices. They argue that the existing market structure helps attract investment in new energy projects and that significant changes could create uncertainty.
Instead, those governments say the EU should focus on expanding renewable energy, strengthening electricity grids and reducing dependence on imported fuels to bring prices down over time.
Italy has taken a more critical stance on the bloc’s carbon pricing system. Prime Minister Giorgia Meloni has called for changes to the European Union Emissions Trading System, arguing that the EU’s carbon market is increasingly adding to energy costs for businesses and industry.
Under the system, companies must buy carbon allowances for the emissions they produce. But because electricity prices in Europe are often set by the cost of the most expensive power generation — typically gas-fired plants — the price of carbon permits can end up influencing the cost of all electricity, including power produced from renewable sources.
Speaking after approving a national decree aimed at cutting energy bills, Meloni said Italy wants to separate the cost of carbon allowances from the price of renewable electricity such as hydro and solar power. She described the proposal as a “courageous structural choice” designed to improve the competitiveness of European industry, although it would require approval at EU level.
Italy has also floated broader reforms to the carbon market, including extending free allowances for energy-intensive industries and limiting price volatility in the carbon market.
The debate highlights the complex challenge facing the EU as it tries to balance climate targets, energy security and industrial competitiveness while keeping electricity affordable for households and businesses.