Wednesday, 23 February 2022 12:08

As Germany hits the brakes on Nord Stream 2, what’s the solution to Europe’s gas crisis?


When Russia annexed Crimea in 2014, Europe was dependent on Russia for 27% of its gas consumption, and it vowed to diversify supplies as a result. Today, Europe is even more dependent on Russian gas than it was back then, at 38%. Diversification has failed, writes Murray Worthy.

Yesterday, European gas prices rose even higher after the news that the German government was pausing the approval of the Nord Stream 2 pipeline in response to Russia’s troops moving into Ukraine. This latest turn in the long-running saga of arguably the most controversial gas pipeline in Europe looks set to increase the misery for consumers facing higher energy bills and the thousands of people across the continent facing energy poverty.

Nord Stream 2 was intended to carry Russian gas directly across the Baltic Sea to Germany, adding more capacity to import Russian gas to Europe alongside the existing Nord Stream 1 pipeline and the pipelines across Ukraine and Belarus. Since its inception, it has been beset by political wrangling, with concerns that it strengthens Moscow’s hand over its Eastern European neighbours and has seen the companies involved in its construction sanctioned by the US.

The project would also have been a climate disaster – emissions from gas are already higher than coal in the EU, and the new pipeline would have added a further 100 million tons of carbon dioxide into the atmosphere every year. That additional gas supply would also lead to more demand for gas – Germany is currently phasing out both coal and nuclear power, so a new gas pipeline could open the floodgates to a whole new generation of climate wrecking fossil gas power stations.

Yet now the future of the pipeline – which lies completed and unused at the bottom of the sea – hangs in the balance. Unless Russia steps back significantly, it’s hard to see how the German government could approve a project that would essentially open up a new pipeline to funnel money into the Kremlin’s coffers. With a third of the Russian government’s income coming from oil and gas, and three-quarters of its gas going to Europe, the continent can’t be seen to bankroll Putin’s government – and its actions in Ukraine – any more than it already is.

For consumers, this means even more volatile and higher prices – with gas prices jumping nearly 10% in the wake of the German government announcement. But consumers should not have to pay the price for this crisis, one which could have been avoided.

In 2014, when Russian linked forces invaded the Ukrainian territories of Crimea and Donbas, the EU’s reliance on Russian gas was, once again, a key political problem. With 27% of its gas coming from Russia, the continent vowed to diversify its sources of gas – pushing for new markets to import gas from America’s fracking boom and the Middle East. Now, as the next crisis has arisen, a staggering 38% of Europe’s gas comes from Russia – diversification has failed.

It did not have to be this way. If instead of trying to find new sources for fossil gas Europe had aimed to phase out gas we wouldn’t be as reliant on Russia, and the price spikes that come with relying on such a volatile partner for our energy. This also points to the ultimate solution to this crisis – getting rid of fossil gas from our energy system.

Renewable energy is cheaper is less susceptible to huge price swings than the gas market – and yet Europe simply isn’t building enough of it. At the same time, far too many homes rely on fossil gas for heating – driving the climate crisis and polluting the air in our cities. Our governments can and must act faster to phase out gas and deliver cheap, clean energy and warm, safe homes for all.

While this transformation is the ultimate answer to the current crisis, it can’t solve the pain consumers will face in the short term. One in ten Europeans cannot properly warm their homes in winter and the share of their income that poorer families have to spend on energy has doubled since 2000. These families have done nothing to cause this crisis and should not be the ones to pay for it.

Governments must put in place targeted support to ensure no one has to choose between heating and eating and that those at the most significant risk of energy poverty can stay warm this winter. No household should have their gas supply cut off, and no one should be forced onto prepayment meters – which in effect force temporary cut-offs on consumers and all too often come with brutally unfair higher costs compared to the discounts offered to monthly paying middle-class households.

This support for those in freezing homes and the transformation of our energy system will come at a cost – and it is a cost the fossil fuel industry must pay. With gas and oil majors like BP, Shell, Eni and Total all raking in record profits – they should be forced to pay a windfall tax on these bumper profits. Similarly, there should be long-term increases in the taxation of gas, oil and coal industries to finance the renovations of Europe’s housing that is urgently needed to ensure people have warm, safe homes and need to use less energy in the first place.

The crisis over Ukraine has only exposed the deeper crisis in our energy system and reliance on fossil gas. The solution is a future without gas.