EU plans windfall tax to counter ‘astronomic’ energy bills

The EU is pushing for national windfall taxes on energy companies’ inflated earnings to counter what European Commission president Ursula von der Leyen described as “astronomic” electricity bills.

The planned levies, which will be debated by EU energy ministers on Friday, would target both fossil fuel producers as well as low-carbon power generators that have reaped windfall profits thanks to artificially inflated electricity prices, according to people familiar with the plan.

Wholesale electricity prices have skyrocketed because they are linked to the price of gas, whether or not the electric power is produced with gas or other means. Gas prices are around 10 times higher than a year ago.

Von der Leyen said the national levies would come alongside measures to reduce electricity use by shifting demand away from peak periods.

Brussels will also work with member states to ensure electricity producers have sufficient liquidity, she said. This will involve the commission displaying “maximum flexibility and speed” to facilitate temporary state aid offered by member states to companies, she said.

Officials said the commission’s temporary state aid framework could be amended to speed through decisions and that talks about state aid requirements were currently in train with member states.

This comes alongside proposals for a price cap on Russian pipeline gas to limit president Vladimir Putin’s profits from his “atrocious war against Ukraine”, von der Leyen said.

The commission has been drawing up measures ahead of the emergency meeting of energy ministers to be held in Brussels on Friday. The initiative comes after Russia said Gazprom would cut supplies via the Nord Stream 1 pipeline until western sanctions are lifted.

“This is a cynical game by Putin and for us a test of unity and solidarity,” von der Leyen said. “European have the economic strength, the creativity and team spirit to win this test of endurance and keep the upper hand.”

Additional reporting by Javier Espinoza in Brussels

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