In particular, policies brought in by European governments to try and tackle the soaring prices risk looking hypocritical in light of the climate ambition they are demanding from the rest of the world at the COP26 summit. Governments of EU countries have rolled back taxes for energy companies, essentially providing subsidies for fossil fuels. Spain, for instance, has capped gas prices and cut taxes in order to help alleviate some of the strain.
The energy price crunch comes amid calls from the UK’s lead on COP26 for a global agreement to end the use of coal power and switch to renewables.
Yet, there is a danger that the energy price crunch is having the opposite effect, undermining the incentive to decarbonise created by Europe’s carbon market, the Emissions Trading Scheme (EU ETS), where prices reached an all-time high of 65 euro per tonne last week.