EU to urge countries to curb gas use to buffer against Russian cuts

By Kate Abnett

BRUSSELS (Reuters) – The European Union will encourage member countries to cut gas demand by incentivising industries to use less, in a bid to prepare for possible further cuts to Russian supply, according to a draft plan seen by Reuters.

Brussels is bracing for potential further cuts to Russian gas deliveries, a scenario the International Monetary Fund chief on Wednesday warned could plunge economies into recession.

The European Commission plan, due to be published on July 20, will suggest countries launch financial incentives for industries to cut gas use, exhaust fuel switching in industry and power plants, and roll out information campaigns to nudge consumers to use less heating and cooling.

Measures targeting industry could include auctions or tenders to incentivise large consumers to use less gas in return for compensation, according to the draft, which could change before it is published.

By acting now, the EU aims to ensure as much gas as possible gets put into storage and build up a supply buffer for winter, when gas demand for home heating peaks.

Households are “protected customers” under EU law, meaning they would be last affected by gas rationing.

“Early joint action at EU level at this critical moment of the storage filling process will reduce the need for possible and more painful demand reduction later in the winter, in case of interruption of flows from Russia,” the draft said.

EU gas storage is currently 62% full, far short of the bloc’s goal to fill them to 80% of capacity by November.

Before Moscow invaded Ukraine in February, the EU relied on Russia for 40% of its gas. That share has plummeted, and flows from Russia are now below 30% of the 2016-2021 average, the draft said.

Moscow has cut or reduced gas deliveries to 12 EU countries since the war began, cutting some off completely over a payment dispute and affecting others by reducing flows through its Nord Stream 1 pipeline to Germany.

That pipeline is now offline until July 21 for annual maintenance, which governments, markets and companies are worried might be extended because of the war.

(Reporting by Kate Abnett; Editing by John Chalmers)