Mr. Cillian O'Donoghue:

I thank Deputy Harkin. I think there are three questions; the first is about the emergency mechanism discussions on 25 October, the second is about the windfall tax and the third is about hydrogen and heat pumps.

Three things will be discussed on 25 October. Gas price caps would have made more sense if we had done them earlier in the process. It is quite technical - the price of gas is linked to the title transfer facility, TTF, which is the hub. It is a fluctuating price. Before ten years ago, gas was linked to oil via oil indexation. Now, it is linked to the TTF hub, which means that when the price at the TTF, which was €15 to €20 traditionally, goes to €300 or €150, the revenues of exporters such as Russia and Norway and, to some extent, Algeria increase dramatically. Russia has made a huge amount of money since the war began, as a result of this pricing mechanism. If the price of pipeline gas had been capped early in the process, much of the revenue which accrued to the Russian state could have been reduced. It would have also helped to reduce electricity prices. I am referring to pipeline gas. LNG is different. Like oil, it is a global market, so the exporter can say no. With pipeline gas, there was some consumer market power to ask for a lower price. It would still have been higher than usual, but there was some scope. Gas price caps make sense if they are well designed and do not undermine security of supply. This is something that should perhaps have been considered earlier in the process.

Another issue is joint procurement. In the interest of European solidarity, it is good to have some joint procurement processes. Traditionally, the European Commission or any European entity is not designed to buy gas. It is a bit like the position with Covid-19 vaccines - we are not set up for that. Usually, it is done by companies. In the interest of solidarity, we need some mechanism to be put in place. That is being set up now. I cannot comment on the rush for gas between member states; I am a member of a European association so I must be sensitive in what I say. We need to show solidarity. There are concerns in internal energy markets that some potential go-it-alone strategies by member states could undermine this solidarity. It will be a test this winter. It is very important that we stay together. That applies not just to the purchase of gas but to exports of electricity also. In the internal electricity market, IEM, electricity flows where it is best to flow. It is important that it stays open. If some member states say they are not going to export electricity because they want to give it to their citizens locally, that is not good. It should be avoided. It is not something that just relates to Ireland, it relates to all member states. Some member states are saying that they want to prioritise their own citizens this winter if there is not enough electricity.

The final question was about the new pricing benchmark. The reference in Europe is the TTF, which is the title transfer in the Netherlands. People are noting that the prices for LNG are much lower in the Asian market compared to Europe. They are asking why we are not investigating the use of an alternative benchmark to the TTF, such as the Asian benchmark, and adding a premium on top to get the supply to Europe. That would entail using the east Asian benchmark, hypothetically, and adding 10% to outbid east Asia. If a shipment is coming from Qatar and it can go to either east Asia or Europe and it will get 10% more in Europe, that might work for LNG. It is starting now but will take a few months to set up. It might make sense. There was a lot of manipulation between the TTF and Russia, which got a lot of revenue from that.

The second issue asked about was the idea of a windfall tax. We cannot do a tax at the European level. As the Deputy will know, tax is the competence of member states and is important for Ireland. As a member state, we have certain taxation arrangements which the EU cannot touch because it is not an EU competence. We came up with an inframarginal revenue cap of €180 per MWh. A tax cannot be retroactive. There needs to be some visibility of where we are going. The inframarginal tax was a kind of compromise but it is not the ideal solution. There probably needs to be some redistribution. There is a solidarity contribution from the oil and gas sector. It is important to understand that the oil and gas sector are the ones making the real profits, rather than the electricity sector, which is very different. That is represented in the company share prices. If you look at the share prices for oil and gas majors, they have really gone up since the beginning of the crisis. That is not the case in the electricity sector. It is important to distinguish between electricity and oil and gas.

The other issue was about REPowerEU and hydrogen and heat pumps. On hydrogen, we have an objective of 20 million tonnes by 2030. It is very ambitious. It is a very nascent industry. We are trying to get 10 million tonnes from Europe and 10 million tonnes imported, particularly from north Africa. That is the objective; we will have to see how that goes. We need to get these projects up and running as soon as possible. We all know that heat pumps make a lot of sense. Many of the obstacles are at the local and household level. I do not think as a member of a European association that I am best placed to comment, as the obstacles are more of a local issue. As Dr. Deane said with regard to savings this winter, it is important that politicians communicate to consumers that anything they can do to reduce their consumption is much appreciated. Campaigns on behavioural change will help a lot.