BRUSSELS – European Union energy ministers agreed on Friday to tax the profits of energy companies as part of an emergency package aimed at mitigating the impact of soaring energy prices on businesses and consumers.
Europe’s energy crisis, compounded by Russia’s periodic cutting off of parts of the bloc’s energy supply as a punishment for supporting Ukraine, has resulted in historically high heating and electricity bills in the bloc. of the 27 members.
Last month, tens of thousands of Europeans took to the streets in at least four countries – the Czech Republic, Slovakia, Germany and Belgium – to protest against soaring energy prices and the record inflation. As winter approaches, governments are under increasing pressure to protect Europeans from blackouts and bankruptcy, while ensuring a continuous flow of energy from alternative suppliers.
The measures approved by the bloc’s energy ministers focused on taxing the profits of energy companies – the proceeds of which would be used to fund subsidies for businesses and struggling households – and a mandatory reduction in electricity consumption. . But ministers have refrained from introducing a cap on the price of petrol – a more sweeping measure sought by several members of the bloc which supporters say would not only help consumers pay their energy bills, but would reduce also these invoices.
“Today we have completed another part of the puzzle, but certainly not the last one,” Jozef Sikela, the Czech Republic’s energy minister who led negotiations on the legislation, told reporters on Friday. “We are in an energy war with Russia, which also strongly affects our industry. Further and coordinated European action is needed.”
Energy ministers meeting in Brussels on Friday agreed to a revenue cap for nuclear and renewable energy providers at $180 per megawatt-hour, as well as a “solidarity” tax on fossil fuel companies. Together, the taxes levied are expected to bring in about $140 billion, which would be channeled into grants. And for the first time in its history, the bloc has imposed a politically sensitive reduction in energy consumption.
These steps would have been inconceivable just a few months ago, but winter is fast approaching. The urgency of the crisis was underscored this week when leaks were discovered in gas pipelines linking Russia to Germany that European officials blamed on sabotage, highlighting the fragility of its infrastructure.
The measures approved on Friday do not go far enough for some EU countries. In a letter to the bloc’s executive earlier this week, energy ministers from 15 of the 27 member countries called for a general gas price cap – opposed by wealthier states like Germany and the Netherlands.
Capping gas prices, they said in the letter to the committee, is “the only measure” to “mitigate inflationary pressure, manage expectations and provide a framework in the event of possible supply disruptions, and limit the additional profits of the sector”. ”
Some experts, however, have warned that such a move could backfire.
“Any intervention to cap energy prices carries the risk of removing a key incentive – high prices – to reduce demand, making Europe worse off,” said Bruegel’s Simone Tagliapietra, an institution of economic research based in Brussels. “Europe must prepare for a new normal without Russian gas. Next spring, to get the 150 billion cubic meters of gas we need, we need to maximize imports from alternative supplies and keep demand lower.
He added: “Any action we take today should not compromise our ability to do so.”