EU drafts 'electrification' plan to curb oil and gas use, after Iran war disruption

By Kate Abnett

BRUSSELS, July 9 (Reuters) - The European Union plans to introduce a raft of policies and funding schemes to shift more of its economy to run on electricity, instead of oil and gas, a draft European Commission proposal seen by Reuters showed.

The draft plan, which the Commission is due to publish on July 17, is part of the EU's response to the Iran war's energy fallout, which sent oil and gas prices soaring in import-heavy Europe. Since late February, the war has added €50 billion ($57.11 billion) to the EU's oil and gas import bill, according to EU data.

In response, Brussels plans to set a target for a minimum percentage of the EU's energy consumption - across the entire economy - to run on electricity by 2040, according to the draft, which was still being developed and did not include a specific percentage.

Faster electrification would mean a bigger shift from petrol and diesel cars to electric vehicles, replacing gas boilers with heat pumps in homes, and electrifying industrial processes - for example, by switching to furnaces powered by electricity, rather than fossil fuels.

The EU is preparing measures to incentivise this shift, which is often held up by high upfront costs for electrified technologies - for example, for electric cars, even if they are then cheaper to run than petrol cars day to day.

The European Commission will consider mandating the installation of heat pumps in public buildings, as part of an update to EU rules on public procurement, and also consider stronger public procurement targets for electric vehicles, the draft said.

A Commission spokesperson declined to comment.

Brussels will also propose a framework for EU member governments to cut VAT on household batteries, EVs and heat pumps, and launch an auction of EU funding later this year for industrial projects that generate heat using electricity and renewable sources.

The EU executive will also propose measures later this year to phase out fossil fuel subsidies - a move designed to help make electricity more cost competitive with oil and gas, the draft said.

"In an era of recurring geopolitical turbulence and volatile global markets, an energy-independent Union powered by clean, abundant, homegrown, cybersecure and affordable energy is a matter of sovereignty," the draft said. "A radical shift towards efficient electrification of demand is required."

($1 = 0.8755 euros)

(Reporting by Kate Abnett; Editing by Susan Fenton)