09 Feb. 2025
By Dr. Naji Makarem, Managing Partner, UrbanEmerge
Europe’s energy crisis has been a harsh wake-up call for policymakers. Electricity prices remain stubbornly high, driven largely by their artificial link to volatile gas markets. Despite renewables now providing a substantial share of electricity generation, consumers are still paying gas-inflated prices, a structural flaw that benefits fossil fuel producers while disproportionately harming households, businesses, and industries.
UCL Professor Michael Grubb’s proposal to de-couple gas prices from electricity prices through a Green Power Pool offers a clear and immediate path to relief: allow electricity from renewables to be sold at its true cost, decoupled from gas pricing. This would slash electricity bills by ensuring that consumers directly benefit from the falling costs of wind and solar power. However, despite its clear advantages, the UK government has rejected this proposal, favoring slow, long-term market reforms that do little to provide immediate relief.
Meanwhile, the European Union’s strategy—subsidizing gas-fired electricity to cap prices—keeps gas companies artificially competitive, maintaining their hold over energy markets and costs tax-payer money. The Commission estimates that “the total cost of energy subsidies in the EU in 2022 alone was €390 billion”. This approach does not challenge the structural problem; it merely shifts the cost burden onto taxpayers. As a result, instead of rewarding cheap renewables, public money is used to prop up an energy system still dominated by fossil fuels.
The failure to implement short-term relief through decoupling electricity from gas is not due to technical limitations or economic constraints. Rather, it is the result of political inertia and the immense lobbying power of gas companies, which have fought hard to delay market reforms that would render them uncompetitive. This is where city governments, often led by a city mayors, can step in; cities may have the power to break the deadlock and demand action.
C40 Cities, the 3Rs, and the Need for Immediate Relief
At UrbanEmerge, we conducted research for C40 Cities on how Mayors can achieve their “3Rs” framework, Relief, Retrofit and Renewables; a strategy for cities to navigate the energy crisis while transitioning to a sustainable future. The first pillar, “Relief”, is about immediate affordability measures to protect residents from soaring energy bills.
UrbanEmerge argue that decoupling electricity prices from gas would be the single most effective policy intervention under this pillar. It would deliver:
Lower energy bills within months, not years;
More market competition, forcing gas-fired electricity producers to adapt or exit;
Accelerated renewable adoption, as investors would see higher demand and clearer price signals.
C40 Cities have the opportunity to galvanise city mayors across Europe to unite and lobby central governments and the EU for immediate relief through innovative market restructuring that will unleash free-trade and competition in the electricity market.
While long-term measures to increase the supply of renewable energy and develop the infrastructure for a sustainable energy future are crucial, ignoring the impact of the current market structure and pricing mechanism does nothing to help families and businesses struggling today.
How Gas Lobbying is Blocking Decoupling
The failure to implement Grubb’s Green Power Pool is not a technical issue—it is a political choice driven by lobbying pressure from fossil fuel companies. In 2023 alone, UK ministers met with oil and gas industry representatives 343 times, averaging 1.4 meetings per day. These lobbying efforts have been effective: despite the urgent need for decarbonisation, the government has approved new fossil fuel projects and rejected structural reforms that would make gas-fired electricity uncompetitive.
The European Union has followed suit. By subsidising gas instead of allowing renewables to set their own prices, it is protecting fossil fuel companies at the expense of taxpayers. The so-called Iberian Exception—where Spain and Portugal cap gas prices—has lowered electricity costs, but at the cost of increased government spending rather than genuine market reform.
The reason why governments refuse to address the root cause of inflated electricity prices is clear: if renewables were allowed to sell at their true cost, gas-fired electricity would quickly become uneconomical. Many fossil fuel producers would go bankrupt, and their influence over energy markets would collapse. This is precisely why they are resisting change despite attempts by Italy and Greece to call for change.
Why Italy and Greece’s Decoupling Efforts Failed
Some national governments did try to push for real decoupling within the EU. In September 2024, former Italian Prime Minister Mario Draghi publicly urged the European Commission to end the artificial link between gas and electricity prices. Greece’s Prime Minister Kyriakos Mitsotakis made similar calls in January 2025, arguing that electricity pricing disparities across the EU required urgent reform.
However, these efforts failed to influence EU policy, primarily due to opposition from fossil fuel-producing countries and powerful lobbying by the gas industry. Governments with strong natural gas interests, including Germany and the Netherlands, resisted changes that would weaken their energy markets.
Instead of addressing the root problem, the EU maintained its subsidy-driven model, which preserves the role of gas in electricity generation rather than allowing true competition with renewables. This failure highlights the structural and political-economy obstacles preventing progressive energy reforms at the national and supra-national levels—obstacles that cities, through collective action, can now seek to overcome.
The Role of City Mayors in Breaking the Deadlock
If most national governments and the EU are unwilling to act, the responsibility arguably falls to city mayors to demand reform. Cities are on the frontlines of the energy crisis, facing:
Rising poverty and energy insecurity as households struggle with high electricity bills.
Higher costs for public services (hospitals, transport, schools) due to inflated energy prices.
Slower progress on net-zero targets because fossil fuels remain dominant.
City mayors have the political legitimacy to pressure national and EU policymakers into implementing short-term relief through electricity market reform. This means:
Uniting behind the demand for an immediate reform to electricity pricing
Lobbying the EU and national governments to reject fossil fuel subsidies and instead adopt a decoupling strategy such as the Green Power Pool model.
Implementing city-led energy procurement strategies that prioritise direct renewable energy purchasing, bypassing fossil fuel-dominated markets where possible.
What Happens If We Do Nothing?
If current policies remain unchanged, the fossil fuel industry will continue to dominate energy markets for years to come, despite the fact that renewables are already cheaper. Consumers will keep paying artificially high prices, governments will keep spending billions on subsidies, and the transition to affordable, clean electricity will be needlessly delayed.
This is not an inevitable reality—it is a political failure driven by vested interests. The energy transition should not be held hostage by the gas industry.
Mayors Can Take the Lead:
We are at a turning point. The evidence is clear: electricity from renewables is cheaper than fossil fuels. Yet instead of reflecting this reality in energy pricing, policymakers are choosing to shield gas companies from competition at the expense of consumers.
The solution is equally clear: UCL Professor Grubb’s Green Power Pool proposal to decouple gas prices from electricity prices offers city mayors a viable strategy to provide immediate relief from high electricity prices. While long-term energy investments are necessary, they do not solve the urgent affordability crisis today.
City mayors have the opportunity—and the responsibility—to lead the fight for energy market reform. They must unite in calling for decoupling and refuse to accept the status quo, which only serves fossil fuel interests.
If national governments will not act, perhaps cities can lead the change.
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