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EU targets 140 billion euros from wind tax on energy companies

The EU is planning to raise 140 billion euros from the profits of energy companies to soften the record high appreciation this winter, equivalent to new tariffs across the bloc in response to the Ukraine crisis. .

A proposed wind tax on non-gas-fired power companies, whose prices have recently skyrocketed, would be accompanied by other measures on fossil fuel groups.

European Commission President Ursula von der Leyen said: “In these times, it is wrong to receive the extraordinary record profits enjoyed by war and by consumers,” said Commission President. European Commission Ursula von der Leyen said, as she outlined proposals to return profits to households and businesses.

“Profits must be shared and delivered to those who need it most. . . Our proposal will raise more than 140 billion euros so that member states can directly take the hit,” she added, during a speech at the State of the Union in Strasbourg on Wednesday.

The commission proposal would place a mandatory threshold on the prices charged by companies producing low-cost, non-gas energy, such as nuclear and renewable energy groups.

Companies will have to provide EU states with “excess profits” generated in excess of this, which the commission seeks to set at €180/MWh. But member states would be free to set their own lower thresholds.

Energy Commissioner Kadri Simson said the commission’s rate would cover the operating costs of lignite, a type of coal that is the most expensive non-gas fuel.

The proposals will have to be approved by member states, which are at odds on this issue, and will meet to discuss it on September 30. But given Russia’s invasion of Ukraine and With growing concerns about energy shortages this winter, many governments have been pressured to act amid fears Moscow will cut off any remaining gas supplies to the EU.

Von der Leyen said the EU was also seeking a “crisis contribution” – a separate tax – from “big oil, gas and coal companies”. [that] are also making huge profits.” This would also make up part of the 140 billion euros that Brussels wants its member states to raise.

But she noted that such payments and wind taxes would be “all urgent and temporary measures” and that the bloc needed to cut electricity demand, lower gas prices and ensure supply security in the future. long-term.

Von der Leyen said Brussels would work to comprehensively reform energy markets to break the “dominant influence” of gas prices on electricity costs.

These markets need to be redesigned so that consumers can reap more benefits from cheap renewable energy, she said, adding that an alternative to the commonly used standard needs to be found. Europe’s gas price, the Dutch TTF, is largely determined by the gas pipeline.

However, traders have opposed the proposal, with one European gas and electricity trader saying it was seen as a “political violation” as the commission struggled to resolve how to lower prices. .

“According to the market, there is no better standard,” said the trader. “There is not yet a real market-based alternative.”

Energy ministers discussed a possible gas price cap last week, and the committee will now begin negotiations with specific suppliers, the president suggested. According to von der Leyen, the EU and Norway will form a task force to reduce gas prices.

Norway’s prime minister, Jonas Gahr Støre, will meet gas companies on Thursday to “discuss longer contracts that can contribute to price stability,” he told state broadcaster NRK. But he has previously stated that he is “sceptical” about a gas price ceiling because it will not solve the fundamental problem of gas shortages in Europe.

Laurent Ruseckas, at S&P Global Commodity Insights, said the proposals “are all extremely complex” and “won’t be figured out and implemented in time for winter even with a political consensus behind -” which is not there”.

France alone said on Wednesday it would cap electricity and gas price increases for consumers to 15% in 2023 as the country implements its own measures. Finance Minister Bruno Le Maire said the French price cap package would cost €16 billion. The government is benefiting from mechanisms built into contracts with renewable energy producers that allow them to recover capital when prices reach a certain level.

The commission said member states have their own plans to limit price increases and that they could introduce “more ambitious measures” to limit the revenue of power producers as long as they do not. market bias and in compliance with EU law.

However, diplomats and officials predict member states will want more flexibility in the EU’s proposed rule to come up with national measures to limit price increases as well as industry structures. difference.

One EU diplomat said: “It would make sense to agree to EU-wide goals and measures, but without allowing national flexibility on how to get there, we run the risk of undermining the EU. disrupt the markets we’re trying to fix.”

Von der Leyen said the EU was “a long way” in its response to Russia’s invasion of Ukraine, adding that she would travel to Kyiv to speak with President Volodymyr Zelenskyy about expanding the interests of the market. common European school for his country. The EU also wants to expand mobile phone roaming to Ukraine, she said.

Claiming that EU sanctions against Moscow had left the country’s industry in “shatters”, von der Leyen added that they were “here to stay”.

Additional reporting by David Sheppard and Richard Milne

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