Windfall taxes on European energy companies ‘weakened’ by intense lobbying, says new study

The study by Fossil Free Politics looks at five case studies, including in Italy, Spain and the UK, where businesses managed, in some cases, to circumvent measures or lobby against their effective implementation.

In Italy, for example, energy giant Eni saw its net profits more than double last year due to the rise in gas prices, but avoided a 25% windfall tax, which was imposed by the former government led by Mario Draghi.

“The law was written so badly that all energy companies appealed legally against it and, so, from the initial expected income of €11 billion, the actual income generated by the tax was €2.8 billion,” said Alessandro Runci from ReCommon, an association that fights against abuses of power.

In the Czech Republic, the owner of fossil company EPH publicly threatened to move one of his companies abroad due to a proposed windfall tax, initially designed to cover excess profits from 2022 with a 100% tax, ultimately delayed until 2023 and reduced to 60%.

“They were able to postpone the implementation of the windfall tax for 2023,” Radek Kubala from NGO ReSet told Euronews.

“So, most of their profits are not taxed by the windfall tax and also they were able to soften some of the net that it’s not 100%, but only 60% from 2023.”

Also, Spain saw some troubles in the application of its windfall tax: a levy of 1.2% of companies’ revenues since 2022, when companies profits increased by 35%.

“Endesa and Iberdrola have resorted to this tax in an administrative dispute that is not yet resolved because what they say is that what the European Union recommended was a tax on profits and not on income and that this harms them,” Irene González from the Alliance Against Energy Poverty Catalunya said in an interview.

In September 2022, the EU agreed on a temporary levy on fossil fuel companies, applied on profits exceeding 20% of a company’s average profits over the previous four years. Activists claim the tax was watered down by a fossil fuel lobbying association.

“In an energy crisis, one that is linked to gas supply, I think it’s just perfectly normal for the gas sector, too, to engage in those discussions with the European Commission in this case. For me, it’s common sense,” Nareg Terzian, Head of Strategy & Communications at IOGP Europe told Euronews.

According to the report, there were over 200 meetings between EU officials and fossil fuel lobbyists the year after Russia’s invasion: almost one per working day.