Households unprotected against the Napoleonic ambitions of the green transition.
European economies, especially the Greek one, remain unfortified in the face of the energy crisis, with the wave of questioning the “green” transition intensifying – reasonably.
In particular, the main area of concern is the renewable sources, to which the EU governments have, as a result, hastily approached, while at the same time the old continent is the target of the intentions of Moscow, which is the main supplier of natural gas.
The criticism of the operation of the CO2 rights market, ie the pollutant exchange, is indicative.
In any case, the Commission and the Member States, so far, are limited to fragmentary proposals and half-measures, without going into the substance of the problems, which have to do with the structure of the energy market, green policy, the need to regulate the stock market. pollutants, natural gas storage at European level and the need to regulate markets.
Households will have a very difficult winter.
High demand for coal
The most shocking example of “green” failure is Lebanon, where due to lack of oil the two power plants that provide 40% of the country’s electricity were closed.
There is no electricity in Lebanon and it will not be there for a few days.
Everyone faces big problemsEU member states, due to the fact that governments have closed power plants that used fossil fuels and “turned” it to RES.
Ironically, this means that coal – the dirtiest possible fuel – is now in high demand.
More specifically, coal-fired power generation increased to historic highs in the first weeks of September, with each day of wind power generation contributing only a fraction of its usual power and speed.
Of course, the situation has changed somewhat, as the wind began to blow louder, reducing coal production by an average of 7.5-8 GWh, about 30-35% higher than in 2020.
In any case, the current increase in coal demand should force the European Union to reconsider its position on minerals – no matter how polluting it may be, it could help alleviate the current energy crisis.
As things stand today, over the next four years at least seven countries will start phasing out coal: Portugal (2021), France (2022), the United Kingdom (2024), Hungary, Italy, Ireland and Greece (all in 2025).
A blow to growth
Naturally, if policy-makers do not change course, a blow to GDP will be inevitable.
Rising gas prices, accompanied by a rise in oil prices to a seven-year high, are causing great uncertainty for households and businesses.
In this context, the outcome of this crisis remains quite uncertain as much will depend on how this winter will go.
It is clear that the impact of the shock on the price of gas and oil is inflationary.
The question is how much will the prices go up?
Examining the relationship between consumer prices for electricity, gas and heating fuel and the price of gas, ING finds some shocking elements.
In any case, the impact of rising gas prices on energy inflation is more “delayed” than rising oil prices, which suggests that the impact of gas could last for a long time.
Of course, this also has to do with the different pricing statuses across the eurozone.
It is recalled that the impact of the shock on the price of gas in 2008 resulted in rising prices in the euro area for an extended period of time.
A year later, prices fell but the prices paid by the consumer were about 12% higher. Therefore, the current crisis will certainly last in 2022, says ING, noting that the energy contribution to inflation will become negative only in the third quarter of next year.
Depreciation and galloping inflation Depreciation
of purchasing power will not leave private consumption untouched in developed countries.
According to Commerzbank , even if households finance part of the additional costs by resorting to savings accumulated from the lockdown period, consumption is likely to lose momentum in the coming quarters.
At the same time, the rate of inflation could turn out to be higher than expected.
The European Commission presented proposals on Wednesday on how to cover the additional burdens.
Governments in Spain, France, Italy and Greece have already announced that they will help low-income households pay their energy bills. However, this will create new holes in national budgets.
The dilemmas facing central banks are also great, with the ECB not considering a policy change at the moment.