The European Union seeks unexpected taxes well below market rate

Brussels is seeking to push ahead with an unexpected tax on European electricity companies by setting a threshold at less than half current market prices.

In draft proposals seen by the Financial Times, the European Commission recommended that governments tax revenue generated by non-gas electricity producers when market prices exceed €200/MWh. The current spot price of electricity in Germany, which is the regional standard, is above €450/MWh. Excess revenue will be redistributed to help businesses and families.

wholesale Electricity prices skyrocketed Because it is linked to the price of gas, whether or not the energy is produced by gas or from other sources. Gas prices are about 10 times higher than they have been on average over the past decade.

Such a cap would simulate “the market outcomes that would be expected if global supply chains were to function normally and were not subject to energy weaponization through gas supply disruptions,” the commission document said.

European Commission President Ursula von der Leyen said on Wednesday that low-carbon energy producers are making “enormous returns, returns they never counted, returns they never dreamed of, and returns they couldn’t invest as quickly.”

This should be an ‘unexpected profit’ Forwarded to Member States To support vulnerable families and businesses.

Henning Gloystein, director of energy and climate at Eurasia Group, said the €200/MWh limit was “high enough to achieve the intended demand reduction in Europe this winter, while giving industry and small consumers at least some assurance that costs will not deteriorate. Even further than that “.

He added that it should also provide low-cost renewable energy producers a sufficient profit margin to provide an incentive to invest, something Brussels is keen to encourage in its efforts to tackle climate change.

Europe has seen pressure on natural gas from Russia, its former largest supplier, in response to Western support for Ukraine. The Kremlin warned on Monday that supplies through the crucial Nord Stream 1 pipeline, the largest between Europe and Russia, would be halted completely until Western sanctions are lifted.

European industries warned of this Facing an ‘existential threat’ Unless policymakers step in to ease energy costs.

Diplomats from the 27 EU member states are due to discuss proposals on Wednesday before an emergency meeting of energy ministers on Friday.

The document also proposes a mandatory target of reducing electricity consumption by 5 percent during peak pricing hours – something von der Leyen brought up as part of a package of five measures, including a Russian gas price cap, changes to warranty requirements for electric companies and an amendment to state aid rules, To allow governments to bail out companies that are on the verge of collapse.

The commission paper warned that incentives to reduce electricity demand must be “cost-effective”, adding that member states must act jointly to avoid distortions in the EU’s internal market.

Several member states complained that Brussels did not act fast enough. European Council President Charles Michel said in an interview on Saturday that the commission “has no day to lose”.

Von der Leyen said the EU faced “difficult times and they are not over soon” and that any measures being taken should be implemented “as quickly as possible”.

EU capitals generally support plans to encourage reductions in demand as the fastest way to tackle crisis But they are divided on how to tackle rising energy prices.

Several countries, including Italy, Spain and Austria, have called for the separation of gas and electricity markets, while others favor restrictions on gas prices.

An EU diplomat warned that placing restrictions on wholesale gas sales could have “negative consequences” if prices fall. The diplomat added that it would be better to set dynamic boundaries for energy markets outside the European Union.

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