According to Ursula von der Leyen, the effects of the closing the Strait of Hormuz are felt immediately by European citizens, including home expenses, groceries, and gas bills (1). To put this into perspective, in just 44 days of active conflict, the EU’s fossil fuel import bill grew by more than €22 billion due to soaring prices (1). Post-2022, the EU stopped using Russian pipeline gas and began using liquified natural gas (LNG), which is traded globally (2). By doing this, it traded one dependency for another, since LNG supplies are still affected by disruptions in key shipping routes such as the Strait of Hormuz. (2) The current crisis has made that weakness clear. Members of the Union have diverging opinions on the sustainability of the EU Emissions Trading System (ETS), with Italy, Hungary, Romania, and the Czech Republic advocating for its elimination, while Denmark, Finland, Spain, and the Netherlands maintain support for the system (3). Experts warn that if the EU’s fundamental carbon pricing system is significantly weakened in 2026 without boosting other climate policies, the entire framework risks collapsing, thereby slowing down clean energy investment (4). The Commission seeks balance by relaxing state-aid standards without scrapping the ETS entirely (3, 5). The broader issue the EU faces is the fragility of its decarbonisation efforts, as the crisis drives up energy costs and risks halting the green transition (2, 6).
The Shock Hitting Europe
From late February to mid-March, the Title Transfer Facility (TTF) benchmark, the primary price tag for European gas, rose from €32 to €50 per unit. At the same time, oil prices approached US$100 a barrel, reaching the point where fuel prices begin negatively impacting economies (2, 6). Moreover, Europe’s gas storage capacity changed dramatically from the 2024 safe buffer of 77 bcm to a critical 46 bcm in 2026, implying that the conflict affects already weak reserves (6). As gas enters a deficit, European purchasers have to compete with Asian countries such as China, Japan, and South Korea for the same LNG supplies on the open market, ultimately spiking prices even higher (6). While the 2022 crisis allowed businesses to switch from LNG to oil, both oil and gas prices have been rising simultaneously in recent weeks, making coal the least expensive but the most climate-unfriendly option (2). While Europe has been phasing out Russian gas since 2022, it remains vulnerable to global fossil fuel trade (6). It risks a trade-off between unstable shipping channels and the distant political threat from Moscow.
The ETS Civil War: Who Wants What
The stances of the Member States differ. On the one side, the eastern and southern European bloc wants a weakened ETS, arguing that the added cost of carbon permits is making it impossible for their enterprises to remain competitive, on top of already increased energy prices (7). Among the proposed solutions is Italy’s ETS redesign plan, which will make carbon permits cheaper rather than dismantling the full system. At the same time, Poland is frustrated with the implementation bottlenecks that Ursula von der Leyen described in a letter (7). There, the Commission's President sided with the ETS-supporting side comprising northern and western Europe (3). In his defence, Wopke Hoekstra, the EU’s Climate Commissioner, claims that the ETS is also a way for Europe to become more self-sufficient, as renewable energy investments are the best way for the EU to withstand war-driven crises (3, 7).
The Commission is currently working on a plan to make state-aid regulations less strict. Soon, they will send out a set of ideas for filling gas storage and rules for temporary tax cuts, planning to finalize an EU-wide electrification target before summer and update ETS benchmarks for long-term solutions (5). Hoekstra notes that the ETS review schedule is planned for either the end of the second quarter or the start of the third quarter, yet one thing is certain: the ETS needs changes, or else it will run out of allowances by 2039 (3, 7).
Crisis As Accelerator Or Brake?
Europe’s current decarbonization fragility not only makes it dependent on foreign fossil fuels but also makes the transition to renewable energy challenging (2). As costs rise and companies switch to coal as the cheapest fuel, pollution worsens, and politicians start using the crisis as an excuse to dismiss climate policy (2). Paradoxically, the 2022 Russian gas crisis pulled Europe closer to the green transition, with considerable investments in renewable energy, lower gas use, and higher goals for clean energy (2). The question now is whether the events of 2026 will have the same effect or act in the opposite direction. Given that European climate policy was already stalling before the Hormuz crisis, there is a risk of an even faster slowdown in the green transition (2). However, experts suggest the lesson should be the opposite. Europe needs to focus on its renewable energy at home, as it is the only way to avoid being exposed to political shocks (6). The Fit for 90 package is a key indicator of whether change is slowing or accelerating. This policy set, planned for late 2026, will change the ETS, carbon border rules, and renewable energy incentives such that emissions are cut by 90% by 2040 (6).