EU energy strategy faces tests on prices, sanctions and Ukraine
Brussels is pushing to cut industrial electricity costs and reshape the carbon market, while a Greek-led revolt threatens to undermine Russian LNG sanctions.
The European Commission has unveiled long-awaited plans to reform the Emissions Trading System, aiming to align the bloc’s carbon market with its 2040 climate goals. Heavy industries will be forced to accelerate decarbonisation, though they will retain access to free polluting credits. The reform is expected to trigger months of political infighting and intense lobbying.
To address industry complaints that high power prices are destroying European competitiveness, Brussels is also proposing network charges and tax reforms to make electricity cheaper than gas. The measures fulfil a March pledge by Ursula von der Leyen and António Costa.
A broader electrification plan sets a new target to electrify the EU economy by 2040 and cut reliance on imported fossil fuels. Buildings, which account for roughly half of the bloc’s gas consumption, are a key priority. Brussels intends to encourage heat pump adoption, improve installation cost transparency and better target existing funding at low- and middle-income households.
Sanctions stall over LNG shipping
While Brussels looks inward at energy costs, its external sanctions policy is faltering. Negotiations on the 21st package of Russia sanctions are stuck on LNG. Greece is challenging a legal ban on transporting Russian LNG to non-EU countries, set to take full effect on 1 January 2027.
Athens argues the ban will not reduce Moscow’s revenue because Chinese operators will simply replace Greek-owned vessels. Diplomats are frustrated that Greece is seeking to reopen a law passed in October 2025, fearing it sets a dangerous precedent for unravelling agreed sanctions. The package has also been weakened by downgrading a ban on Russian soldiers to a non-binding intention, and deferring Austria's request to lift sanctions on Rasperia over a €2.1 billion hit to Raiffeisen Bank International.
Ukraine reshuffle targets energy resilience
Europe’s energy security concerns extend to Kyiv, where Ukraine’s parliament has endorsed a sweeping wartime cabinet reshuffle. Sergii Koretskyi, the chief of state energy company Naftogaz, was appointed prime minister to steer energy resilience and EU integration.
The appointment follows public protests over the dismissal of defence minister Mykhailo Fedorov, who accused commander-in-chief Oleksandr Syrskyi of blocking reforms and "splitting the country". The internal military rift presents a complication for European capitals backing Kyiv’s war effort and integration path.
