President of the European Commission

As the President of the European Commission, the two policies I would present to the European Parliament the attention over the next five years include a) A strategic policy plan to reduce Europe’s dependence on Russian natural gas; b) a strategic policy plan to address the rising food prices. Presently, Europe faces two major problems; the increasing fuel prices due to Russian inversion on Ukraine and a potential food crisis, and an increase in food prices due to disruption in supply due to the Russian-Ukrainian war. The Russia and Ukraine wan war presents novel challenges that the EU must address promptly to avoid further economic crisis.

The Russian inversion of Ukraine has again threatened Europe’s dependence on Russian natural gas. Russian supply accounts for about 40% of Europe’s gas consumption, which could crash the European economy if the supply is disrupted abruptly and no measures are taken to correct the supply. In 2021 alone, the EU imported an average total of 140 billion cubic meters (bcm) or about 380 million cubic meters (mcm) daily of Russian gas through the pipeline and, in addition, 15 bcm as an LNG (liquefied natural gas) (IEA 2022). Europe’s net-zero ambition aims to lower gas consumption and imports has been ongoing, but the current crisis due to Russian inversion of Ukraine raised particular questions on what policymakers can do concerning imports from Russia (IEA 2022), and as the President of the Commission, that should be a warring concern too. The strategic plan to respond to the gas crisis induced by the Russia-Ukraine war should cover three key strategic areas:

According to IEA, the gas supply contract with Russian state-owned company Gazprom of about 15 bcm annually, about 12% of the company’s export to the EU in 2021, is set to expire by the end of 2022, while another contract of 40 bcm annually will expire by 2030. This provides a near-term strategic opportunity for the EU to diversify the gas supply, signing new contracts with alternative sources. EU can leverage the import options offered by its large pipeline and LNG infrastructure. Besides, taking advantage of these expiries of long-term contracts with Russia will significantly eliminate the minimum contractual take-or-pay for Russian supplies (IEA 2022). EU should therefore concentrate the next five years on exploring and establishing contractual relationships and infrastructure to support the diversification goal.

The minimum gas storage requirement policy will help to enhance market resilience during a gas crisis. Gas storage is vital to meeting seasonal demand fluctuations and offering insurance against unexpected events that lead to gas prices spiking. The present constricted seasonal price spread in the EU oil and gas market does not offer adequate incentives to encourage storage injections. Besides, EU requires harmonized minimum storage commitments alongside a comprehensive market-based capacity allocation approach to promote optimal use of every available EU storage capacity. This will improve the resilience of the EU’s gas system. A report by IEA states that rigorous policy effort to accelerate further renewable energy capacity may add about 20 terawatt-hours (TWh) by 2023 from solar PV and Wind power, and even more effort is injected (IEA 2022). Policy toward accelerating renewable energy capacity will significantly reduce Europe’s over-reliance on gas use.

The second strategic policy plan is to address the rising food prices. The inflation in consumer food prices has been rising in several EU member states even before the Russia-Ukraine war because of the high energy costs alongside other inputs costs. The prices are expected to rise further with the disruption in trade due to the conflict. The production and supply of grains, fertilizers, and energy have been adversely impacted, evidenced by the escalating prices of these commodities (Baquedano et al., 2022). The European Commission should keenly monitor the events and their impacts and devise a policy plan to respond to any resulting disruptive impacts. Even though the EU is a net food producer and exporter, the recent increase in food prices may impact low-income citizens and disrupt the social protection programs supported by the EU. Policy support is necessary for producers sectors adversely impacted by rising input costs to unstainable levels and scenarios where the market outlet is disrupted. For the EU to react effectively to these imminent threats of market disturbance, the Commission must persuade the Member States to support agricultural sectors negatively affected by current market trends and the war in Ukraine. The Member States must formulate policy measures to tackle market imbalances and increase food security. The policy measures should be directed to farmers hardest hit by the ongoing crisis. The policy support should prioritize if the producer pursues the following goals: nutrient management, circular economy, environmentally friendly production, and effective use of resources (Baquedano et al. 2022). Besides, farmers not directly benefiting from the Union aid payment should at least have the economic benefits resulting from the Union aid fully passed on to them.

References

Baquedano, F., Jelliffe, J., Beckman, J., Ivanic, M., Zereyesus, Y., & Johnson, M. (2022). Food security implications for low‐and middle‐income countries under agricultural input reduction: The case of the European Union’s farm to fork and biodiversity strategies. Applied Economic Perspectives and Policy.

A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas – Analysis – IEA. IEA. (2022). Retrieved 19 April 2022, from https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas.