The European Commission on Wednesday proposed a 33% tax on the extraordinary profits of oil, gas, coal and refinery companies, whose revenues should be “collected by Member States and channeled to energy consumers”, in order to lower prices. .
“The Commission proposes a temporary solidarity contribution on excess profits generated by activities in the oil, gas, coal and refinery sectors”announces the setting.
In an information released this Wednesday, the community executive points out that: “This time-limited contribution would preserve investment incentives for the green transition”should be “charged by Member States on the basis of profits in 2022 with an increase of more than 20% compared to the average profit of the last three years” and applied to fossil fuel companies.
“Revenues would be collected by Member States and channeled to energy consumers, especially vulnerable households, the hardest hit businesses and energy-intensive industries”and can also support “cross-border projects” for renewable energy and energy efficiency, he adds.
According to the European Commission’s proposal on this emergency intervention to tackle high energy prices, to which the Lusa agency had access, the aim is to “applicable rate for the calculation of the temporary solidarity contribution of at least 33%”which “will apply in addition to the normal taxes and charges applicable under the national law of a Member State”.
specifically, “the temporary solidarity contribution should act as a redistributive measure to ensure that the companies concerned, which have achieved excess profits due to the unexpected circumstances, contribute proportionately to the amelioration of the energy crisis in the internal market”argues the municipal secretary.
To calculate the extraordinary income to be taxed, the taxable profits of EU companies in the oil, gas, coal and refinery sectors for the fiscal year beginning on or after 1 January 2022 are taken into account, with the remaining profits as surplus above an increase of 20% compared to the average of the last three financial years.
The community administrator justifies that EU companies whose turnover is 75% dependent on the oil, gas, coal and refinery sectors have seen their profits increase in recent months as a result of “to the sudden and unpredictable circumstances of the war, the reduction in energy supply and the increase in demand due to record high temperatures”.
“This approach to determining the basis of calculation ensures that the solidarity contribution is proportionate in different Member States and, at the same time, this approach to setting a minimum rate ensures that the solidarity contribution is fair and proportionate”the institution decides.
In information released to the press, the community administration said that this emergency intervention in European energy markets aims to: “dealing with recent dramatic price increases” and to “serious mismatch between energy supply and demand, largely due to Russia’s continued arming of its energy resources”.
“To alleviate the mounting pressure on European households and businesses as a result, the Commission is now taking the next step to tackle this problem by proposing exceptional measures”is still indicated.
Last Saturday, Portugal’s finance minister, Fernando Medina, argued that the rise in energy prices “cannot be solved with fees”.
Geopolitical tensions as a result of the war in Ukraine have consequences for the European energy market.
European Commission wants to cut electricity consumption by 5% to lower gas prices
The European Commission this Wednesday proposed a temporary mandatory 5% reduction in electricity consumption during peak hours, which are more expensive, and a 10% drop in overall demand to lower gas prices.
“The first response to address high prices is to reduce demand, which can affect electricity prices and have an overall calming effect on the market. To target the most expensive hours of electricity consumption, when power-generating gas has a significant impact has on price, Commission proposes obligation to reduce electricity consumption by at least 5% during selected price peak hours”announces the institution in an information released this Wednesday.
specifically, “Member States will be required to identify the 10% of hours with the highest expected price and reduce demand during those peak hours”adds.
Moreover, Brussels wants to “that Member States aim to reduce global electricity demand by at least 10% by 31 March 2023″reports the press.
According to the European Commission’s proposal on this emergency intervention to tackle high energy prices, to which the agency Lusa had access, the aim will be to impose a mandatory reduction target for “focus specifically on the most expensive hours of electricity consumption, while gas generally determines the marginal price”.
The European Commission then proposes “a mandatory target of at least 5% reduction in gross electricity consumption during selected peak price hours, at least 10% of the hours of each month when prices are expected to be highest”according to the proposal.
The institution explains that “This mandatory target would result in the selection of an average of three to four hours per working day, which would normally correspond to peak load hours, but could also include hours when electricity production from renewables is expected to be low and that production from marginal plants is needed to meet to meet the demand”.
Institution data shows that a 5% reduction during 10% of the hours with the highest electricity demand would lead to an estimated reduction in gas consumption of approximately 1.2 billion cubic meters over a four-month period, ultimately amounting to about 3.8% of gas consumption for energy.
It is up to the Member States to take measures to reduce the total electricity consumption by all consumers, including information and communication campaigns aimed at consumers, but also through “economically efficient and market-based measures such as auctions or tenders for demand response or unused electricity”sums up Brussels.
This can be existing schemes or national incentives to develop demand response, but also financial incentives or compensation to market participants, an example of the community administrator, noting that “the introduction and implementation of such measures should be without prejudice to the application of State aid rules”.
In the current configuration of the European market, gas determines the world price of electricity when it is used, as all producers receive the same price for the same product – electricity – when it enters the grid.
There is agreement across the EU that this current marginal pricing model is the most efficient, but the sharp energy crisis, exacerbated by the war in Ukraine, has sparked debate.
As the EU is heavily dependent on imports of fossil fuels, especially gas from Russia, the current geopolitical context has led to volatile electricity prices.
Proposed cap of €180/MWh for electricity from renewable energy sources
The European Commission will propose a temporary cap of 180 euros per megawatt hour (MWh) for electricity produced without using gas, but from sources such as renewables and nuclear energy, and provides for the collection of revenues above this limit.
“The Commission proposes to set the infrastructure revenue cap at 180 euros per MWh, which will allow producers to cover their investments and operating costs without hindering investments in new capacity, in line with our energy and climate targets for 2030 and 2050″announces the institution in an information released this Wednesday.
In particular, Brussels wants “a temporary revenue cap for infra-marginal electricity producers, i.e. cheaper technologies such as renewables, nuclear and lignite, which supply electricity to the grid at a cost below the price level set by the more expensive marginal producers”who currently “achieving exceptional revenues, with relatively stable operating costs”.
It is predicted that “Revenues above the ceiling are collected by Member State governments and used to help energy consumers reduce their bills”said the community administrator, urging merchants to sign bilateral agreements by December 1 this year to “sharing a portion of the infrastructure revenues collected by the producing state for the benefit of the end users”.
According to the European Commission’s proposal on this emergency intervention to tackle high energy prices, to which the agency Lusa had access, an “approach to recover excess revenues from producers with lower marginal costs” is at stake.
Brussels explains that the maximum revenue cap of 180 euros per MWh “includes the necessary safety margin”, as recent analyzes of the European market have shown that this cap would lead to “stabilization of average revenues around 150 euros per MWh”.
“Such cap should be limited to market revenues rather than covering total production revenues – including, for example, those from aid schemes – to avoid a significant impact on a project’s initial projected profitability”Brussels explains in the document that Lusa has access to.
It is up to the Member States to “appropriate procedures to recover excess income from producers, as the income cap can be applied at the time the transactions are settled or, if not possible, later”points to Brussels.
This cap will then apply to market revenues from the sale of electricity produced from technologies whose marginal costs are below the cap, such as wind, solar, geothermal, nuclear, biomass, etc.
In the proposal to which Lusa had access, Brussels also defends “whether it is acceptable in the current context to extend price regulation” [da eletricidade] for small and medium-sized enterprises”.
“As EU energy legislation does not provide a specific framework for these consumers, allowing Member States to extend regulated pricing interventions in the form of regulated prices to small and medium-sized enterprises during this crisis would give them another tool to assess their impact. to master “says the institution.
In the current configuration of the European market, gas determines the world price of electricity when it is used, as all producers receive the same price for the same product – electricity – when it enters the grid.
Source: DN
