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Saturday, July 13, 2024

EU to Put Out Crisis Measures to Curb the Rise in Energy Prices

European governments have already invested hundreds of billions of euros in tax cuts, freebies, and subsidies

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BELGIUM: On Wednesday, the European Union (EU) is expected to announce plans to skim off energy corporations’ unanticipated profits and limit the amount of electricity used throughout the Union to protect consumers and businesses from rising energy costs.

As they work to handle an energy crisis driving record inflation, causing the industry to halt output, and raising individuals’ bills in advance of winter, European governments have already invested hundreds of billions of euros in tax cuts, freebies, and subsidies.

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The European Commission will make an effort to cover up those disparate national actions with a more comprehensive, bloc-wide reaction that would apply to all 27 EU member states.

According to a draft of the Commission’s plans, which Reuters was able to obtain, governments would be able to earn money by skimming off the top of the extra income from Europe’s non-gas-fueled power plants and using it to assist residents and businesses with their debt.

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The proposed regulation would cap the revenue that nuclear power plants, wind farms, and solar farms can generate for producing electricity at 180 euros per megawatt-hour (MWh), with governments recovering any additional revenue and using it to assist consumers. The proposal is subject to change before it is published.

That would set a revenue ceiling for generators at less than half of what the market is already selling things for. The front-year electricity price in Germany last month reached a record high of more than 1,000 euros/MWh and was trading at above 400 euros/MWh on Tuesday.

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Fossil fuel companies would also be subject to a windfall profit tax to recoup what the Commission called in the draft “unexpected earnings” brought on by rising gas and oil prices, which were exacerbated by Russia’s cutting back on gas deliveries after its invasion of Ukraine.

As of the fiscal year 2022, companies in the oil, gas, coal, and refining industries would have to contribute 33% of their taxable surplus profits as a “solidarity payment.”

But the Commission has abandoned its initial idea of restricting Russian gas prices. The EU’s member states disagree on whether broader price caps will benefit or hurt the continent’s attempts to ensure its energy supply for the winter.

EU nations will have to negotiate the Commission’s suggestions and agree on final laws. Diplomats from certain countries expressed optimism that agreements may be reached at a meeting of EU energy ministers on September 30 now that divisive gas price ceilings have been taken off the table, at least temporarily.

To conserve fuel during the colder months, the draft EU plan would also set a mandatory objective on countries to reduce electricity usage by 5% during the 10% hours with the highest electricity demand each month.

Also Read: Top EU Nations Proceed with Global Tax Plan Despite Hungary Veto


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