The EU Commission believes a gas price cap is 'impossible.'

The EU Commission believes a gas price cap is ‘impossible.’

After much wrangling at an all-night summit, EU leaders agreed last month to task the executive European Commission with proposing a temporary EU framework to cap gas prices in electricity generation and create a temporary natural gas transaction price corridor to bring down costs for consumers.

But a compromise between those like France, Spain and Belgium that want a cap, and the German-led camp opposing it meant additional conditions were attached, namely that any cap could not affect long-term contracts, lead to an increase in gas consumption or provoke producers to reroute supplies elsewhere.

The matter has divided EU countries for months as they look to address an acute energy crunch that is driving record-high inflation and threatening recession in the bloc.

A diplomat said the Commission instead offered a voluntary “market correction mechanism” that did not go far enough for countries demanding a cap to instantly limit price spikes.

“Maybe Germany and the Netherlands got a lot of concessions to water the cap down but the idea of having a cap was still there in the EU leaders’ summit decision.

While the “market correction mechanism” idea fell below the expectations of those wanting to intervene decisively in market prices, it drew a warning from Europex, the association of European energy exchanges.

“We are concerned that the mechanism… will lead to a deterioration of security of supply and risks to financial stability,” Europex said in a statement.

After what is expected to be a heated Friday meeting of the 27 national ambassadors to the EU in Brussels, the bloc’s energy ministers are due to discuss the issue on Nov. 24.Should a deal on gas cap remain elusive, the subject would go back to the very top, with the next summit of EU leaders due on Dec. 15 to 16.

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Source: EU Commission says gas price cap ‘impossible’

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