EU countries and businesses criticise Brussels’ €140bn energy proposals

Brussels’ plan to lower energy prices across the EU is facing pushback from industries for being too vague and by member states for not allowing enough flexibility to account for national energy markets.

The EU’s proposals to counter spiralling gas and power prices and risks of blackouts this winter include windfall taxes worth €140bn on energy producers that would be redistributed among consumers and businesses and a mandatory cut to peak electricity use.

But energy-intensive sectors such as aluminium and steel production have said the plans will do little to ease current high prices that have led to the shutdown of large portions of industry.

The measures “are unlikely to stop the current trend of production curtailments and temporary lay-offs”, said Axel Eggert, director-general of Eurofer, the European steel association.

European Aluminium, the trade body, said Brussels’ efforts “are not enough” to address soaring input prices sparked by Russia’s “weaponisation” of energy, adding that they “will not save the aluminium industry from further production cuts, job losses and possibly a complete breakdown”.

It suggested that a portion of the windfall taxes should go to critical industries under the state aid element of the European Commission’s plans.

Several of the EU’s 27 member states want the proposed mandatory cut in electricity demand, set at 5 per cent of usage in peak hours, to be voluntary. Others have questioned how peak hours of electricity demand should be identified and are pushing back against the possibility of more regulation.

“How do we police this thing so it is legitimate and achieves the [objective] that we want?” said one European energy official.

Member states discussed the plans on Thursday and are expected to put forward revisions to the legal text over the weekend. Energy ministers will meet to agree the final proposal on September 30.

But national differences risk slowing up agreement on the measures. The Netherlands has a liberalised electricity market, which makes a levy on non-gas power generators difficult. Luxembourg, Lithuania and Latvia, net importers of electricity, have warned that with no power generators they will not receive any emergency income unless neighbouring countries share the tax revenues.

Poland is among states to raise the issue of the windfall taxes, which the commission has called a “revenue cap” for non-gas power generators and a separate levy or “solidarity contribution” on oil and gas majors, being pushed through by a majority vote of member states, when tax legislation usually requires unanimous approval.

Proposals for a price cap on gas exports and liquidity support for energy companies have been left out of the current legislation.

The Czech Republic, which holds the rotating European Council presidency, tasked the commission with coming up with mechanisms to cap gas prices and extend liquidity support for energy companies facing steep collateral demands.

The commission previously mooted a price cap solely on Russian gas but the idea has been strongly opposed by states such as Austria, which still receives 50 per cent of its gas from Russia and fears retaliatory cut-offs.

Momentum is building among some member states for an overall price cap on imported gas, several EU diplomats said, but there are no signs of agreement on how it would work.

“There are 60 shades of a price cap,” said one senior EU diplomat. “We are travelling around the world to get more gas but at the same time saying we want it cheaper.”

The commission is still working out how to provide financial support for energy companies. It is working on measures with the European Banking Authority and the European Securities and Markets Authority, but member states are already putting forward their own ideas.

Finance ministers early next month will discuss ideas for a “circuit breaker” that would stop energy trading at times of “excessive volatility”. Slovenia has proposed the plan, claiming in a submission seen by the Financial Times that “market manipulators” are driving prices higher.

“France is sympathetic but the commission and Germany are less keen,” one diplomat said.

Additional reporting by Andy Bounds in Brussels