June 19, 2024

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EU plans unexpected taxes to counter ‘astronomical’ energy bills

EU plans unexpected taxes to counter 'astronomical' energy bills

Brussels is pressing for unexpected national taxes on bloated profits of energy companies to counter what European Commission President Ursula von der Leyen called “astronomical” electricity bills.

The proposed tariffs, which EU energy ministers will discuss on Friday, will target fossil fuel producers and low-carbon power generators that have reaped extra profits thanks to artificially inflated electricity prices, according to people familiar with the plan. They then seek to transfer the proceeds to vulnerable consumers and households.

Wholesale electricity prices have risen due to their correlation with the price of gas, whether or not electric power is produced by gas or by other means. Gas prices are about 12 times higher than they were a year ago.

Von der Leyen said in prepared notes that national duties would be part of proposals that also seek to reduce electricity use by shifting demand away from peak periods. Brussels will also work with member states to ensure electricity producers sufficient liquidity.

The commission’s plans will also include a cap on the price of gas in Russian pipelines, which is intended to limit President Vladimir Putin’s profits from his “heinous war against Ukraine,” according to von der Leyen.

Russia said on Monday that state-owned Gazprom would do so Cut off supplies via Nord Stream 1 . pipeline Until Western sanctions were lifted.

“This is a cynical game by Putin and for us a test of unity and solidarity,” von der Leyen said, noting that the European Union was in a stronger position to take a hard line given its efforts this year to diversify supplies away from Russia. “It is almost impossible for Russia to find new customers for gas pipelines in the short term.”

Unexpected national taxes will be applied to profits made by energy companies that do not rely on gas for energy production, such as wind farms and nuclear power plants. Member states have yet to support the proposals. The commission is also calling for taxing oil and gas producers who have enjoyed record profits, as it seeks to show that it is not only low-carbon energy producers that have to contribute to mitigating the crisis.

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The commission proposes reducing electricity consumption during peak times by shifting industrial operations to times of lower usage such as weekends and nights. This comes on top of a voluntary plan to reduce gas demand by 15 percent, which member states agreed to in the summer.

Von der Leyen also wants the EU to help utilities struggling with “Putin’s manipulated market volatility”, saying that Brussels will work with member states to ensure adequate liquidity in the sector.

As part of this, officials said the Commission will temporarily adjust the state aid framework to expedite requests from EU capitals to support their facilities. The Commission has in the past relaxed state aid rules for companies that have suffered during Covid-19 lockdowns and from the ripple effects of the Ukraine war.

The committee is also considering changes to the rules for trading in the energy markets. Christian Ruby, general secretary of Euroelectric, the trade body for the European electricity industry, said regulators needed to “expand the list of assets that would [be] Qualified as collateral to “accept non-cash assets and prepare to ‘avoid the domino effect’,” as well as expand lines of credit for businesses in crisis.

Additional reporting by Javier Espinosa in Brussels