EU leaders are meeting in Brussels for a two-day summit with one item topping the agenda: the energy crisis.
The 27 heads of government and state will debate a new package of emergency measures unveiled earlier this week by the European Commission, the second of its kind in two months.
For the first time, the package includes the layout of an EU-wide cap to bring high gas prices under control, but the measure, which is still under development, would only be triggered in cases of extreme volatility and speculation in the market.
The price cap would be dynamic and act as a maximum ceiling for transactions at the Dutch Title Transfer Facility (TTF), Europe's leading hub for gas trading, and other similar venues.
"The time has come," said European Commission President Ursula von der Leyen when she presented the proposal. "It is important to move with a clear signal that we are willing to be reliable partners on the market but not at any price any more."
The measure, while innovative, falls short of the broader price cap demanded last month by a group of 15 member states, including France, Italy and Spain. Their proposal would artificially limit the price of all gas imports entering the bloc and all gas transactions taking place.
Von der Leyen, however, has left the door open for a more targeted cap that would apply only to the gas used for power generation. Spain and Portugal have already introduced such a model, which is based on a massive subsidy programme that covers the difference between the wholesale gas price and the state-sponsored cap.
But extending the so-called Iberian model to the entire EU entails multiple risks.
Key questions remain
EU officials and diplomats acknowledge there are still several key questions left unanswered, such as the financial cost of an EU-wide state aid programme, potential leakages of cheap subsidised power outside the bloc's borders, and a more-than-likely increase in gas consumption once prices are capped.
"We have no idea if the Iberian model will work elsewhere," said a senior EU diplomat, speaking on condition of anonymity. "Whatever measure we're taking, we must be sure of what the impact is going to be."
Besides price caps, the European Commission's latest package includes other measures that appear to have wider consensus across the political spectrum, such as joint purchases of gas to secure lower prices, a new benchmark dedicated to liquefied natural gas (LNG), and solidarity rules to ensure member states help each other out if they suffer from acute gas shortages.
The debate on energy is expected to be heated, as member states hold diverging opinions on how to curb gas prices while preserving security of supplies. Due to the complexity of the issue, EU leaders will be compelled to engage in very technical details, something unusual for high-level summits.
"An intelligent price cap does not hamper supplies if you apply it well," said a diplomat from a Western country.
Another point of friction will be the idea of issuing common EU debt to cushion the painful impact of the energy crisis. This kind of collective response was agreed during the coronavirus crisis and resulted in a historic €750-billion recovery fund, comprising grants and low-interest loans.
Some countries are wary of potential fragmentation across the single market if capitals continue to pursue uncoordinated, go-it-alone solutions. Germany's surprising €200-billion aid programme fuelled these concerns and shed light over the gap between wealthy and debt-ridden states.
"The debates are intense but it is not one country against the others. Everyone has doubts and they are legitimate," said a diplomat from a Southern state.
Officials also point out the fact there are still more than €200 billion left unused from the COVID-19 fund, which the Commission wants to transform into a new plan to slash dependency on Russian fossil fuels.
In addition to energy, EU leaders will discuss the worrying evolution of the bloc's economy, recent developments in Russia's war in Ukraine and EU-China relations.
On Thursday, Ukrainian President Volodymyr Zelenskyy will virtually address heads of governments and state.
The focus will also be on Iran, as the country continues to provide the Russian army with kamikaze drones and military training. Russia has allegedly used the drones in attacks against Ukraine's essential infrastructure.
The escalation has accelerated new rafts of EU sanctions against Iran and laid the groundwork for a ninth package of penalties against the Kremlin.
At one point during the summit, EU leaders will bid farewell to Italy's Prime Minister Mario Draghi, a highly respected technocrat who is expected to be soon replaced by far-right leader Giorgia Meloni.