The EU has ways to learn to live with less gas

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The EU has ways to learn to live with less gas
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Italy has it worse, because it uses it for 40% of its mix, compared to 26% in Germany and 16% in France.

The stoppage of the Russian Nord Stream 1 gas pipeline leaves Europe with an almost certain gas deficit this winter. This makes the introduction of measures to reduce energy consumption inevitable. Moving quickly could help the bloc avoid messy emergency rationing, but some countries appear better prepared than others.

Since the Russian invasion of Ukraine, Europe has rushed to replace some of the 140 billion cubic meters (140 bcm) of annual supply from Russian pipelines. But it has done little to reduce demand for gas, even as state operator Gazprom has cut exports. Government subsidies to consumers, worth almost 300,000 million euros, may even have acted in the opposite direction.

The closure of Nord Stream 1 may lead to a shortfall of up to 20% in the EU’s gas needs this year, according to RBC estimates. A complete stoppage of Russian gas could trigger chaotic rationing, and even a 2% contraction in the region’s GDP next year, say analysts at Amundi.

Europe has ways to cushion the blow. The European Commission calculates that the bloc, which has increased its emergency gas reserves, could reduce consumption by 15%, or 45 bcm, through energy saving measures. Lowering thermostats by one degree Celsius in public buildings and homes could save the bloc 10 bcm of gas a year, 7% of Russian imports. Customers’ energy bills would also be reduced.

Companies will also have to reduce demand. The European Commission estimates that around 15 bcm could be saved by switching to other energy sources or using gas more efficiently. However, governments could encourage greater savings by offering financial compensation to companies that voluntarily reduce their use of gas. This would save another 20 bcm.

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History shows that cost-saving measures can be quickly implemented in the event of a crisis. Japan, whose energy capacity was affected by the Fukushima nuclear disaster in 2011, reduced its electricity consumption by 12% for industry and 10% among households, through a mixture of social mobilization and mandatory measures.

However, some EU countries will have more difficulties than others. This may be the case for Italy, which uses gas for more than 40% of its power generation, compared to 26% and 16% for Germany and France, respectively. And at 9%, the share of energy in production costs is also higher in Italy than in its EU industrial rivals. However, Rome only reduced gas consumption by 2% in the first half of the year, compared to 15% in Berlin. Quick action is needed so that Europe learns to live with less gas.