European Union proposes to charge US$140 billion in taxes from energy companies

The European Union wants to raise €140 billion ($140 billion) by taking advantage of windfall profits from some energy companies to help families and businesses pay soaring gas and electricity bills.

This Wednesday (12), the European Commission proposed limiting the profits of producers of renewable and nuclear electricity and taxing the windfall of oil and gas companies.

Profits from power generators using wind, solar and nuclear power have increased because their tariffs are linked to the wholesale price of natural gas, which hit a record in March after Russia invaded Ukraine, now about 550% higher than a year ago. levels.

Europe sanctioned Russian exports of oil and coal after the invasion, prompting Moscow to reduce gas supplies in return.

European Commission President Ursula von der Leyen said on Wednesday that the bloc will carry out a “deep and comprehensive reform” to decouple the cost of gas from the price of electricity.

“These companies are getting revenue they never counted, they never dreamed of,” she told EU lawmakers in a speech in Strasbourg, France.

“It is wrong to receive extraordinary record profits benefiting from the war and on the backs of consumers,” he added.

The Commission’s proposals still need to be debated and adopted by EU member states.

The bloc could introduce a cap of 180 euros ($180) per megawatt-hour on electricity produced by renewable energy companies, the Commission said in a statement.

The reference price for wholesale gas in Europe is currently 212 euros ($212) per megawatt-hour.

Natural gas and oil prices started to rise last year as countries reopened from their pandemic lockdowns, sparking a surge in demand.

But Russia’s invasion of Ukraine in late February – and the resulting energy conflict between Europe and Moscow – set them off.

Oil has since retreated as the global economic slowdown leads to reduced demand, but natural gas prices remain higher than their March peak.

The EU proposal is part of a package of measures to help the region weather the energy crisis this winter, when temperatures drop and demand typically rises.

The package includes a “crisis contribution” from oil, gas and coal producers, who have made equally huge profits, and mandatory targets for countries to reduce their electricity consumption during peak hours.

The Commission said in its statement that EU member states must levy an extra tax on any profits that exceed the average earnings of the last three years by more than 20%.

It did not specify the tax rate.

“They have to pay their fair share,” von der Leyen said.

She also said that the billions of national governments that have already committed to supporting consumers “wouldn’t be enough” on their own.

Together, European countries and the UK – which is mired in its own energy crisis – have so far pledged around 500 billion euros ($500 billion) in subsidies to help households and businesses deal with skyrocketing energy bills.

The UK imposed a 25% tax on windfall profits from its oil and gas companies earlier this year to help pay for an initial round of relief for customers this year.

But Prime Minister Liz Truss has ruled out raising or extending the tax to help fund her much bolder plan to cap household bills at £2,500 ($2,888) a year for the next two years and support businesses for the next six months.

Analysts say such measures could cost up to 150 billion pounds ($173 billion).