Opinion

Europe must get serious about cutting oil and gas use

As energy security risks increase, European governments must stop subsidising oil and gas, and ask people to consume less.

By: Date: April 29, 2022 Topic: Global economy and trade

This opinion piece was originally published in Corriere della Sera and Le Monde.

Corriere della Sera logo

Le Monde logo

Russia’s turning off of natural gas supplies to Poland and Bulgaria on 26 April marks a serious escalation in the Russian attempt to weaponise energy against Europe. Further interruptions could follow. In readiness, European governments must accelerate their diversification away from Russian oil and gas.

To do so, European governments should not only look for oil and gas alternatives elsewhere. They also need finally to get serious about oil and gas demand reduction. This will involve stopping subsidies for oil and gas, and asking people to consume less. While politically difficult, these measures are now urgent, from both energy security and public-finance perspectives. Measures cannot be postponed anymore.

Since the start of Europe’s energy crunch last summer, European governments have been heavily subsidising oil and gas consumption, through measures including direct payments and tax cuts. Initially designed to provide a quick fix to what was supposed to be a temporary problem of high energy prices, these measures have ballooned and have now become structural.

Since September 2021, Germany, France, Italy and Spain have each spent €20 billion to €30 billion to artificially lower gas and electricity bills, and gasoline and diesel prices. Such heavy subsidisation is unsustainable from a public-finance perspective and damaging from geopolitical and energy-security perspectives – not to mention the environment. Europe imports 40% of its gas and 25% of its oil from Russia, meaning EU governments are basically providing subsidies to President Putin.

But European governments should acknowledge that in the current situation, higher energy prices are a key part of the solution. Cutting oil and gas demand is crucial for Europe to increase its resilience in the face of interruptions to Russian flows. Instead of universal energy subsidies, European governments must focus on shielding poor households and vulnerable small and medium companies from higher energy prices by providing them with decent lump-sum transfers. This would be good policy, while subsidising the running of expensive SUVs is bad policy.

Governments must ask people to consume less and should have the courage to tell their citizens that Europe is in the midst of what possibly represents the greatest energy crisis in its history. This requires extraordinary efforts from all, according to their capabilities. As Italian prime minister Mario Draghi asked recently, “Do we want to have peace, or do we want to have the air conditioning on?” This underlines the basic truth that it is our individual responsibility to take simple daily actions that might ultimately not even impact our lifestyle, in order to contribute to the solution to this crisis.

For example, simple energy saving actions such as turning down the thermostat or turning up the air conditioning by just 1°C, working from home when possible, or reducing cruising speed on motorways by 10 kilometres per hour, could save enough oil to fill 120 super tankers and enough natural gas to heat 20 million homes. For this to happen, governments must actively promote awareness campaigns, adopt financial schemes to prompt households to save energy, and introduce regulations mandating energy savings in public buildings. Each cubic metre of gas not consumed is now important, especially as Europe might need to replenish its gas storages without Russia gas ahead of next winter.

To avoid Putin’s energy blackmail, Europe needs to deploy all possible options at its disposal. Compared with difficult and expensive supply-side options, such as finding substantial additional volumes of LNG, demand-side options could be a potentially significant quick win.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic More by this author
 

Blog Post

REPowerEU: will EU countries really make it work?

By acting together, the European Union can optimise its response to the energy crisis in all scenarios but each country will have to make concessions.

By: Simone Tagliapietra Topic: Green economy Date: May 18, 2022
Read article
 

Blog Post

The EU needs transparent oil data and enhanced coordination

The EU lacks the coordination structure and transparent data necessary to most effectively navigate an embargo on Russian oil.

By: Agata Łoskot-Strachota, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: May 16, 2022
Read article More on this topic
 

Opinion

For Europe, an oil embargo is not the way to go

Even at this late hour, the European Union should consider taking a different path.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 9, 2022
Read article More on this topic
 

Opinion

A tariff on imports of fossil fuel from Russia

A tariff on imports of Russian fossil fuels would allow Europe to hit Russia's energy sector without great suffering.

By: Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

External Publication

How to weaken Russian oil and gas strength

Letter published in Science.

By: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Ulrich Schetter, Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article More on this topic
 

Opinion

A phase out of Russian oil may be less effective than a tariff at reducing Putin’s rents

A punitive tariff on all energy imports from Russia would be a better choice than a gradually phased-in embargo on selected fuels.

By: Simone Tagliapietra, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade Date: May 2, 2022
Read article
 

Blog Post

How a European Union tariff on Russian oil can be designed

The European Union should apply a tariff on imports of Russian oil; it can be accompanied by a quota for a gradual, conditional phase-out of all Russian oil imports.

By: David Kleimann, Ben McWilliams and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 29, 2022
Read article
 

Opinion

EU risks letting Putin’s gas divide-and-rule strategy win

The 2 May meeting of EU energy ministers should deliver strong and common EU action. Failing to do so would undermine Europe’s unity, energy security and foreign policy.

By: Agata Łoskot-Strachota, Simone Tagliapietra and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 29, 2022
Read article Download PDF
 

Working Paper

Cutting Putin’s energy rent: ‘smart sanctioning’ Russian oil and gas

The most efficient way for Europe to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.

By: Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Simone Tagliapietra, Ulrich Schetter, Guntram B. Wolff and Georg Zachmann Topic: Global economy and trade, Green economy Date: April 28, 2022
Read article More on this topic
 

Blog Post

A sanctions counter measure: gas payments to Russia in rubles

A requirement for gas to be paid for in rubles is a way for Russia to side-step central bank sanctions.

By: Maria Demertzis and Francesco Papadia Topic: Global economy and trade Date: April 19, 2022
Read article
 

Opinion

Cutting Putin’s energy rent: ‘smart sanctioning’ Russian oil and gas

Three ways Europe could limit Russian oil and gas revenues.

By: Axel Ockenfels, Simone Tagliapietra and Guntram B. Wolff Topic: Global economy and trade, Green economy Date: April 11, 2022
Read article More on this topic
 

Blog Post

The European Union demand response to high natural gas prices

Even before Russia’s invasion of Ukraine, high natural gas prices triggered an estimated European Union demand cut of about 7%.

By: Ben McWilliams and Georg Zachmann Topic: Green economy Date: April 8, 2022
Load more posts