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MNI BRIEF: EC Non-Paper Says Gas Cap Would Help Cut Inflation

(MNI) LONDON

The EU Commission sees the net benefits of a temporary gas price cap could be around EUR13 billion and would likely reduce overall inflation, in a 'non-paper' published today. The 'non-paper', an informal discussion document, follows calls from EU leaders last week for a temporary framework to cap gas prices along with a cost-benefit analysis to demonstrate the measure’s practicality.

The document says that the design favoured by several member states could be “attractive”. This version of the cap would set the price cap at around EUR100-120/MWh compared with the EUR60 current price.

The benefits would derive from the fact that the subsidy is only paid to gas-fired power plants but the resulting reduction of the wholesale clearing price at the same time reduces the revenues of inframarginal generators, which do not receive the subsidy. “The resulting net benefits could have a beneficial effect on overall inflation,” the paper notes.

MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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