Europe must become more resilient to fluctuations in the global oil and gas market, according to two researchers from the Potsdam Institute for Climate Impact Research (PIK) and Uppsala University. They argue that the ETS 2 is an effective tool for achieving this, as it would save the EU billions of euros.
Op-Ed by Matthias Kalkuhl and Daniel Spiro, published in Table.Media on 12 May 2026
The blockade of the Strait of Hormuz and rising energy prices send a clear warning: Europe must become more resilient to fluctuations in the global oil and gas market. These resources are largely controlled by autocratic regimes. For instance, only one-third of global oil production takes place in democratically governed countries; if we exclude the U.S. as an erratic, fragile democracy, that share drops to 16 percent.
Our economic fate is significantly influenced by autocracies. And even small supply shocks have enormous price effects. The EU spends around 2 percent of its economic output on importing fossil fuels. A 50 percent price increase therefore immediately costs us 1 percentage point of our national income, with knock-on effects on investment, public debt, and unemployment that take years to fully repair.
Fossil fuels are both the means and the end of geopolitical and power-political action. This also applies to America, long our undisputed most important ally. Over the past 50-plus years, there have been no fewer than five price shocks on the global oil market caused by geopolitical conflicts (1973, 1979, 1990, 2022, and 2026)—meaning the annual probability of such an oil crisis is around 10 percent on average.
In some places, oil production hinders democratization. Examples include Venezuela and Nigeria. At the same time, it enriches countries that pose a significant threat to the EU’s security, such as Russia and Iran. Every euro Russia earns from oil exports and pours into the war in Ukraine costs the EU many times that amount in reconstruction aid and military support. It is therefore imperative, both economically and in terms of security policy, that the EU become less dependent on fossil fuel markets and the autocrats who dominate them.
The pressure to act is mounting. Just four years after the last energy crisis triggered by Putin, we are facing another one. What can be done? It is often overlooked what currently constitutes the most effective and powerful tool for the EU to reduce this dependence, coordinate appropriate measures among member states, and leverage the EU’s market power in global energy markets.
It is European climate policy. The new, second emissions trading scheme for the heating and transportation sectors, set to be introduced in 2028, will gradually reduce the EU’s demand for oil and gas to nearly zero within two decades—and thereby also drive down world market prices. This will cause Russia and Iran to lose significant revenue in just a few years.
The ETS 2 saves the EU billions. Otherwise, those funds would be paid to autocratic regimes. It also generates revenue that can be channeled into social measures to support climate policy and into new, independent energy infrastructure. Furthermore, emissions trading helps stabilize the overall costs for consumers of fossil fuels in the coming years: When global market prices spike, demand for oil and gas—and thus for emission allowances in the ETS—falls. As a result, the price of CO2 automatically drops as part of the total cost. This buffer reduces the need for countries to go it alone with relief measures during crises.
And these unilateral moves are certainly questionable. The German “gasoline rebate”—that is, the reduction of fuel taxes—during the current crisis may seem politically appealing. But in the short term, it perpetuates the market overheating that is costly for consumers. And in the medium term, it fuels the expectation that the state will be ready to step in again during the next crisis—so that we continue to settle into our dependence on oil. If all EU countries do this, Europe collectively drives up the global price of crude oil and ultimately shifts taxpayers’ money to foreign oil exporters. Support during the crisis should instead take the form of income-based transfers.
And Europe can do even more. Gradually reducing the use of fossil fuels, expanding European electricity production, and electrifying transportation, heating, and industrial processes: these measures benefit the climate and public health while also securing Europe’s strategic future. Europe will then be less exposed to volatile global oil and gas markets, reduce its import costs, and limit the flow of funds to authoritarian regimes. In this transition, Europe must avoid replacing its reliance on oil with new dependencies by building domestic capacity and reliable partnerships for critical minerals, rare earths, and clean energy technologies.
The time to act is now. Fanatical autocrats and erratic leaders should no longer be able to damage our economic prosperity to the extent we are currently experiencing.
Matthias Kalkuhl heads the “Climate Economics and Policy” department at the Potsdam Institute for Climate Impact Research and teaches at the University of Potsdam. His research areas include carbon pricing and cooperation on financing global public goods such as climate protection and biodiversity. Daniel Spiro is a professor of economics at Uppsala University (Sweden). His research focuses particularly on conflicts, energy issues, and their interactions with environmental problems.
Original publication: https://table.media/en/climate/opinion/how-europe-can-reduce-its-dependence-on-dangerous-autocrats
