The Twenty-Seven agree to tax the surplus profits of energy companies

It is an important first step that the Twenty-Seven took this Friday, but much remains to be done to limit the devastating impact of the energy crisis which is sweeping the Old Continent. The Union’s energy ministers, meeting in Brussels, managed to agree on a new regulation which should come into force in October.

This text imposes a reduction in electricity consumption, after having done the same for gas in July. The idea is to reduce, even in a small proportion, the imbalance between supply and demand to prevent prices from soaring, especially at certain times of the day. A reduction in overall demand of 10% is decided on a voluntary basis.

For the hours of high consumption, a reduction of 5% is imposed, this time mandatory. Each Member State will be free to take the measures it deems appropriate to achieve this objective. The European Commission may bring proceedings in the event of a breach.

Second important decision, the Member States will be able to recover part of the surplus profits reaped by certain low-cost electricity producers (nuclear, renewable, but not hydroelectricity or biomethane). The profits generated when electricity is sold at more than 180 euros per megawatt hour between 1^er December and June 30 will be confiscated and can be used to fund consumer support measures like retail price freezes.

Disputed calculations

The Commission estimates that 117 billion euros could thus be mobilised, but some experts doubt that such a sum will be reached. In France, this exceptional levy will yield little, because the regulations in force already allow the State to recover a large part of the “surplus profits” from nuclear and renewables.

Third measure confirmed this Friday, the Twenty-Seven will have to tax the oil companies on their European activities of production of hydrocarbons and refining. A minimum rate of 33% will apply to profits deemed excessive in 2022 (profits 20% higher than the average of the last four years). Member States will be able to go beyond 33% if they wish. Brussels has estimated the yield of this measure at 25 billion, but this calculation is disputed. Financial analysts (RBC, Citi, etc.) expect less than 10 billion.

“Go much further”

The Twenty-Seven are now discussing measures to reduce gas and electricity prices on the wholesale markets. A cap on the price of imported gas is on the table, but no consensus has emerged yet. France and fourteen other countries want to cap the price of all gas arriving in the Union by pipeline, and not just Russian gas, as the Commission would like. To date, the fifteen States have not convinced Germany, nor the Commission, who fear that this will cause a reduction in the volumes of gas available for Europe.

“We will have to go much faster, much further and make other proposals, declared the French Minister for Energy Transition, Agnès Pannier-Runacher, in Brussels this Friday. I will not let companies, local authorities, industrialists stop in France because we are facing electricity prices and gas prices that are too high”

10% inflation

The energy crisis is fueling inflation, which has now reached a record 10% in the euro zone. Time is running out as the sabotage of Russia’s Nord Stream Russia gas pipelines poses additional threats to Europe’s supply. On Thursday, Germany announced that it was preparing to borrow an additional 200 billion euros to finance its shield against soaring energy prices for households and businesses.