Energy giants face EU windfall tax
Energy giants could be hit with a windfall tax from the European Union (EU) – with the trading bloc weighing up a temporary levy on companies that have cashed in on surging oil and gas prices.
EU leaders are expected to meet for a two-day summit later this week to discuss further measures to tackle the energy crisis – including a proposal from the European Commission to bring in a windfall tax.
It is expected they will give the political green light to the proposal – with a temporary tax on energy companies linked to surging gas and power prices.
In a draft political statement, seen by Bloomberg, leaders are set to approve the levy as a “useful source of financing”.
This follows BP and Shell announcing bumper profits and a massive dividend payouts last month.
The EU is also looking for additional sources of income as it seeks to ease spiralling costs for consumers – with wholesale costs remaining historically elevated.
Current market conditions could lead to excess profits of up to €200bn in the EU for gas, coal, nuclear, hydropower and other renewables in 2022, according to the International Energy Agency.
So far, Chancellor Rishi Sunak has resisted calls for a similar measure in the UK, warning it could deter investment at a crucial time – despite persistent demands from the opposition for a £1.2bn one-off levy.
While the EU has stopped short of following the UK and US in imposing sanctions on Russia, the bloc is set to begin joint purchases of gas, liquefied natural gas and hydrogen as part of efforts to reduce reliance on Russian imports.
Meanwhile, Germany reached a long-term liquefied natural gas deal with Qatar last week.
The EU’s executive arm has floated the concept of a windfall tax in the past few weeks, noting returns of some energy companies that don’t depend on gas – and therefore aren’t facing extremely high production costs – could be subject to special measures, with proceeds used to aid consumers.
The leaders will probably stop short of endorsing intervention in the wholesale energy market, asking ministers instead to urgently analyze various short-term options, particularly decoupling power and gas prices.