EU Commission proposes a new EU instrument to limit excessive gas price spikes

On November 22, 2022 the EU Commission has continued its response to the ongoing energy crisis by proposing a Market Correction Mechanism to protect EU businesses and households from episodes of excessively high gas prices in the EU. This complements measures to reduce gas demand and ensure security of supply through diversification of energy supplies. The new mechanism aims to reduce the volatility on European gas markets while safeguarding the security of gas supply.

Following the Russian invasion of Ukraine and weaponisation of energy supplies, natural gas prices have seen unprecedented price peaks across the EU, reaching all-time highs in the second half of August this year. The extreme price spike over almost two weeks in August was highly damaging for the European economy, with contagion effects on electricity prices and an increase in overall inflation. The Commission is therefore proposing to prevent the repetition of such episodes with a temporary and well-targeted instrument to automatically intervene on the gas markets in case of extreme gas price hikes.

A press release and Q&A are available online.