E.U. ministers approve taxes on energy profits to support struggling households.

BRUSSELS — Energy ministers in the European Union agreed on Friday to tax the profits of energy companies as part of a set of emergency measures aimed at softening the impact of soaring energy prices on businesses and consumers.

Europe’s energy crisis, aggravated by Russia’s periodically cutting off parts of the bloc’s energy supply to punish it for supporting Ukraine, has led to historically high heating and electricity bills in the 27-member bloc.

Last month, tens of thousands of Europeans took to the streets in at least four countries — the Czech Republic, Slovakia, Germany, Belgium — to protest against spiraling energy prices and record inflation. With winter approaching, governments have been under mounting pressure to shield Europeans from blackouts and bankruptcy, while at the same time ensuring a continued energy flow from alternative suppliers.

The measures approved by the bloc’s energy ministers focused on taxing energy-company profits — the proceeds of which would be used to fund subsidies for struggling businesses and households — and a mandatory reduction in electricity consumption. But the ministers stopped short of introducing a cap on the price of gas — a more radical measure sought by several members of the bloc that proponents say would not just help consumers foot their energy bills, but would also bring those bills down.

“Today we have completed yet another part of the puzzle, but definitely not the last one,” Jozef Sikela, the energy minister from the Czech Republic who led the negotiations on the legislation, told reporters on Friday. “We are in an energy war with Russia, which also strongly affects our industry. Further and coordinated E.U. action is needed.”

The energy ministers gathered in Brussels on Friday agreed to a cap on revenues of nuclear and renewable energy suppliers at $180 per megawatt-hour, as well as a “solidarity” tax on fossil fuel companies. Together, the levied taxes are expected to bring around $140 billion, which would be channeled into subsidies. And for the first time in its history, the bloc mandated a politically sensitive reduction in energy consumption.

Those steps would have been inconceivable mere months ago, but winter is fast approaching. The urgency of the crisis was underscored this week when leaks were discovered in gas pipelines connecting Russia with Germany that European officials blamed on sabotage, highlighting the fragility of its infrastructure.

The measures approved on Friday do not go far enough for some E.U. nations. In a letter to the bloc’s executive arm earlier this week, energy ministers from 15 out of 27 member nations called for a general cap on the price of gas — which wealthier states such as Germany and the Netherlands oppose.

The cap on gas prices, they said in the letter to the commission, is “the one measure” to “mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector.”

Some experts, however, have warned such a measure could backfire.

“Any intervention aimed at capping energy prices entails the risk of removing a key incentive — high prices — to reduce demand, making Europe worse off,” said Simone Tagliapietra of Bruegel, a Brussels-based economic research institution. “Europe needs to prepare for a new normal without Russian gas. Next spring, to get the 150 billion cubic meters of gas we need, we have to maximize imports from alternative supplies and keep demand lower.”

He added: “Any measure we adopt today should not compromise our ability to do that.”

Source: https://www.nytimes.com/2022/09/30/world/europe/eu-ministers-approve-taxes-on-energy-profits-to-support-struggling-households.html