The EU has agreed on two important legislative proposals: The electricity market in Europe is to be reformed, and the EU will also receive a uniform supply chain law. Negotiators from the EU states and the European Parliament agreed on this on Thursday morning.
The law for Restructuring of the electricity market is intended to better protect consumers in Europe from escalating electricity prices in the future. In addition to more stable prices, the innovations are intended to promote the expansion of renewable energies. The compromise still needs to be formally confirmed by the EU Parliament and the federal states.
Due to extremely high electricity prices last year, calls for a reform of the European electricity market had become loud. The reason for the high prices was, among other things, exploding gas prices due to the Russian war of aggression on Ukraine. It was also noticeable that at times around half of France’s nuclear power plants failed.
The basis for the agreement reached was a legislative proposal from the EU Commission from the spring. This provides for private individuals to be given the right to fixed-price contracts as well as contracts with dynamic prices. A core element of the reform proposals, according to the wishes of the member states, are new long-term contracts between governments and electricity producers, so-called contracts for difference. In this way, states guarantee electricity producers a minimum price for electricity when they make new investments. This should apply to investments in renewable energies and nuclear power. If the market price falls below an agreed price, the state steps in and makes up the difference. If the price is higher, the surplus goes to the state. This is intended to create incentives for the domestic production of clean electricity.
In principle, the electricity market in the EU will continue to function according to the so-called merit order principle. This refers to the order of deployment of the power plants offered on the electricity exchange. Power plants that can produce electricity cheaply are used first to meet demand. These are, for example, wind turbines. In the end, the price depends on the most expensive power plant that was switched on last – often gas power plants.
The EU supply chain law is intended to hold large companies accountable if they profit from child or forced labor outside the EU. Companies must also submit a plan that ensures that their business model is compatible with the goals of the Paris Climate Agreement. If human rights violations occur in the supply chains of these companies, it should be possible to take action against them before the European Court of Human Rights.
The chairwoman of the Internal Market Committee in the EU Parliament, Anna Cavazzini, spoke of a good day for human rights, but she would have liked to see even stricter rules for climate and environmental protection. The Green politician also emphasized that the EU supply chain law goes beyond the German law and that more companies are covered by the rules.
A supply chain law has been in force in Germany since the beginning of the year and must now be adapted to the new EU regulations. The national law currently applies to companies with more than 3,000 employees; under EU law, this should already apply to companies with more than 250 employees. The German supply chain law also only takes direct suppliers into account, while the EU-wide directive applies to the entire supply chain.