Posted Sep 14, 2022 11:10 AMUpdated on Sep 14, 2022 at 5:31 PM
The excess profits of the energy companies that Europe is preparing to tax should bring in more than 140 billion euros, which will be able to be paid back to the Member States to help businesses and households in difficulty and finance green investments.
This is one of the strong messages issued on Wednesday by the President of the European Commission Ursula von der Leyen, during her speech on the state of the european union at the European Parliament in Strasbourg.
The Brussels executive is keen to restore the injustice created by what it describes as “undue rent” from energy companies that are profiting from the crisis and the surge in prices that accompanies it. The promise had been made to put in place measures to limit the rise in energy prices for European businesses and households. “It is difficult to accept that some profit from the war and make mega-profits on the backs of consumers”, thus justified Ursula von der Leyen.
The Commission plans to cap the income of producers of renewable, nuclear and biomass electricity at 180 euros per megawatt hour until March 31, 2023. And to tax the excess profits of companies in the fossil fuel sector (oil, gas, coal, refining) up to 33% in fiscal year 2022.
These measures, exceptional and temporary, and which have a consensus in Brussels, must be adopted during a council of European energy ministers on September 30.
“Some profit from war”
In detail, the revenue cap for electricity companies would raise 117 billion, according to initial estimates, while the tax on oil companies would bring in much less, 25 billion.
This would represent a total of 1% of the Union’s GDP, Citi analysts have calculated. A significant amount, but much lower than what the Member States have already spent to fight against energy inflation, in total nearly 3% of the GDP of the Twenty-Seven.
Compared to the cost of the energy bill, estimated at 800 billion, these “recoveries of profits”, as the senior Brussels officials say, may appear very meager. But “budgetarily, freeing up a public intervention capacity of 140 billion all at once is frankly not negligible,” assures a source from the European Commission.
The next question that will be debated is that of the equitable distribution of this “manna” between the Twenty-Seven, some producing more electricity than others. The measure could thus benefit some members more than others.
Reduce consumption
“We need a solidarity agreement between Member States for a fair distribution of income. The redistribution should go more towards the countries where we pay the most for electricity,” Frans Timmermans, first vice-president of the European Commission, told journalists. “A common fund could be created and the redistribution would be done according to the needs of the countries. But nothing has been decided yet,” underlines a senior official.
To lower the electricity bill, Member States will also have to reduce their consumption, with a general objective of 10%, voluntary, and another 5%, mandatory at peak times. Everyone will have the choice to define how to achieve this.
While energy companies are experiencing liquidity problems the Commission promises to modify the State aid framework in October to allow public guarantees and avoid a scenario à la Lehman Brothers .
“When everyone is more zen…”
As for the highly controversial issue of a Russian gas price cap imported, it is still on the table but postponed.
“There are still member states that have to fill their reserves, so we have to wait a few weeks when everyone will be more relaxed before addressing this issue again,” underlines a source at the Commission. Vladimir Putin’s threat to cut off the gas to all of Europe if such a measure were to see the light of day (which would undoubtedly have the effect of raising prices even further) it would therefore be a hit.
At the same time, the Twenty-Seven are still working on the electricity market reform . The idea is to decouple electricity prices from gas prices to break the inflationary spiral. A complex project which is therefore only feasible in the longer term.