EU countries approve energy windfall levies, return to gas price cap

  • EU approves energy windfall profit taxes
  • Gas price caps are the next step for countries
  • States are divided over how to control sky-high prices

BRUSSELS, Sept 30 (Reuters) – European Union countries agreed on Friday to impose emergency taxes on energy companies’ windfall profits and began talks on the next step to tackle Europe’s energy crisis – a bloc-wide gas price cap.

Ministers from the 27 EU member states met in Brussels on Friday, where they approved measures proposed earlier this month to curb rising energy prices.

The package includes a tax on fossil fuel companies’ surplus profits this year or next, another tax on low-cost power producers’ high revenues and a 5% reduction in electricity use during peak price periods.

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With the deal in place, the EU’s next move began negotiations on Friday morning to curb the price crisis, with many countries wanting a wider gas price cap, though others – notably Germany – are opposed.

“All these temporary measures are very good, but in order to find a solution to help our citizens in this energy crisis, we need to control gas prices,” Croatian Economy Minister Davor Filipovic told a meeting on Friday.

Fifteen countries, including France, Italy and Poland, asked Brussels this week to propose a price cap on all wholesale gas transactions to curb inflation.

Belgium, Greece, Poland and Italy said in a memorandum seen by Reuters on Thursday outlining their plan that the cap should be set “high and flexible enough to allow Europe to attract the necessary resources”.

Countries rejected the Commission’s claim that a wider gas price cap would require “significant financial resources” to finance emergency gas purchases if market prices exceed the EU’s limit.

Belgian Energy Minister Tinne Van der Straeten said only 2 billion euros ($1.96 billion) would be needed, as most European imports are under long-term contracts or arrive by pipeline without easy alternative buyers.

It will be part of the 140 billion euros it expects to raise in its windfall profits taxes on EU energy companies.

But Germany, Austria, the Netherlands and others warn that wide gas price caps will make it difficult for countries to buy gas if they can’t compete with buyers in price-competitive global markets.

An EU diplomat said the idea “risks security of supply” as Europe heads into winter with tight energy supplies after Russia cut gas flows to Europe in retaliation for Western sanctions against Moscow over its invasion of Ukraine.

The European Commission has also raised doubts, suggesting instead that the EU move forward with narrower price caps, targeting only Russian gas, or specifically gas used for power generation.

EU energy policy chief Kadri Simpson said “we need to put a price cap on all Russian gas”.

Brussels suggested the idea earlier this month, but it has met with opposition from Central and Eastern European countries, which worry that Moscow will retaliate by cutting off the remaining gas it still sends to them.

By introducing EU-wide measures, Brussels hopes to overcome governments’ uneven national approaches to the energy crisis, which has seen richer EU countries do more than poorer countries to provide money to ailing companies and consumers struggling with bills.

Germany, Europe’s biggest economy, set out a 200 billion euro package on Thursday to deal with rising energy costs, including a gas price brake.

Luxembourg Energy Minister Claude Durms has urged Brussels to change EU state aid rules to prevent “insane” spending competition between countries.

“This is the next frontier, to get more unity and stop these infighting,” Durmes said.

($1 = 1.0182 euros)

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Reporting by Kate Abnett and Gabriela Pacinska; Additional reporting by Philip Blenkinsop, Bart Meijer and John Chalmers; Editing by John Harvey

Our Standards: Thomson Reuters Trust Principles.

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