Combating Energy Crisis In Europe

The energy crisis sparked by the Ukraine crisis continues to loom large over European economies, businesses, and consumers. Europe’s high energy prices have fuelled an 8.5 per cent annual inflation rate in the euro area.

Skyrocketing energy prices and supply interruptions are of utmost concern to EU leaders and the Council. To address the high costs and imbalances in the energy sector, EU nations have come together and are closely coordinating their responses. The energy crisis brought on by Russia's conflict in Ukraine continues to have a substantial impact on economies, corporations, and consumers. The elevated cost of energy in Europe has contributed to an 8.5 per cent annual inflation rate. The cost of living rose by 10.9 per cent in Italy. It affects energy-hungry businesses as well.

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A variety of policy measures are to be implemented by European governments. One category of measures attempts to lessen how much-increasing expenses will affect both consumers and enterprises. Retail price restrictions, controlled tariffs, assistance programmes for businesses that use a lot of energy, and financial or capital support for energy corporations, including even nationalisation, are some of these. Another group of policies is to contain wholesale costs, bring them down, and guarantee energy security. This includes measures to promote energy efficiency and supply growth while also capping energy costs, especially wholesale gas prices.

Germany spends more than USD 60 billion on countering rising energy prices. A USD 300 one-time energy allowance for employees and USD 147 million in financing for low-income families are important initiatives. However, it is anticipated that households will pay an additional USD 500 for electricity this year. A USD 200 cost of living incentive will be given to employees and pensioners in Italy. Additional measures were introduced, including a USD 800 million fund for the car industry and tax rebates for sectors with high energy demand. Households in the U.K. will receive a USD 477 subsidy in the winter to help cover electricity expenses as energy bills are expected to triple throughout the season. The energy issue is costing more as a proportion of GDP in several Eastern European nations, as households spend a bigger percentage of their income on energy bills. Greece has the highest expenditures, at 3.7 per cent of GDP.

The need to reanalyse energy supply, energy consumption and energy output has been brought to light by the conflict in Ukraine. In recent months, energy costs have fallen significantly across Europe. Families will therefore experience cheaper energy costs in the upcoming weeks and months. However, those energy bills will still be two to three times higher than they were previously.  Although the EU's Temporary Crisis Framework can help businesses struggling to survive in the face of high energy costs, some experts are concerned that it could cause market distortion. Loosening these state assistance regulations a little is one of Europe's customary responses to crises. When competition policies in Europe are loosened and watered down, such as state aid regulations, the two largest countries–Germany and France–are the ones who have the fiscal space, the money to spend to subsidise their companies more than others, benefit the most.

To reduce emissions and eliminate the need for Russian fossil fuels, the EU has unveiled a bold plan for renewable energy. The RePowerEU strategy aims to increase the proportion of renewable energy in the EU's energy mix from 22 to 45 per cent by 2030. By 2027, the EU expects to have invested more than USD 210 billion in the strategy. By 2050, this will advance earlier initiatives to attain net-zero emissions, which entails a balance between greenhouse gas emissions and removal from the environment.

In addition, the EU has committed to spending money on infrastructure for hydrogen and biomethane, two cleaner gas substitutes, while also tripling the capacity of wind and solar energy. By taking voluntary actions like lowering the heat in public buildings and urging people to use fewer home appliances, EU members also hope to reduce overall energy usage by 15 per cent.

The EU continues to be a leader in "green" ideas and high-value patents on a global scale, ranking first in the world for patent applications in the areas of energy (22 per cent), transportation (28 per cent), and climate and environment (23 per cent). More public and private investments in clean energy research and innovation, scale-up and deployment activities, however, are essential for the twin green and digital transition.

The financial and regulatory frameworks of the EU are extremely vital in this situation. It is essential to create an effective EU R&I ecosystem, close the gap between research and innovation and market uptake, and continuously assess national R&I activities. These factors, along with the implementation of the New European Innovation Agenda, are what will make the EU more competitive. In this regard, the European Commission approved the Horizon Europe work plan for 2023–2024 in December 2022. This would make it possible for academics and innovators in Europe to pursue ground-breaking solutions for the environmental, energy, digital, and geopolitical challenges that our economies and society are currently experiencing, with a budget of about 13.5 billion Euros.