L R AS Published on Monday 12 September 2022 - n° 415 - Categories:Europe
European energy ministers lean towards taxing super-profits
In the midst of the current energy crisis, Europe's energy ministers can only support measures to curb soaring gas and electricity bills.
(Editor's note: politically, what else can they say to their public??). The Commission is proposing to cap the revenues of nuclear and renewable energy operators (wind, solar, biomass, hydro) who sell their electricity at a price well above their production costs. Governments could deduct the difference between this cap and the market price to redistribute these "super-profits" to vulnerable households and businesses.
The proposal to cap the price of gas paid to Russia has sparked debate among ministers (gas now accounts for only 9% of European imports, compared with 40% before the war). Moscow is threatening to stop supplies if such a mechanism is applied. The European Commissioner for Energy pointed out that "we must be careful not to undermine the security of our supplies" during the winter. For public opinion, she is announcing "unprecedented measures for next week to respond to this unprecedented situation".
These soaring electricity prices are the result of malfunctions in the European electricity market: the wholesale electricity market price is based on the cost price of the last power station mobilised to meet demand, which is often a gas-fired power station.
Tecsol of 10 September 2022
Editor's note The ministers and the Commission are discussing. They are sticking to generalities, responding to public opinion and sensational measures. But they are careful not to say how much such a tax on superprofits could bring in. How much would the Treasury earn from taxing the owners of solar power plants who have signed an agreement to sell their output under the tendering procedure? or who have signed PPAs? What would be the situation for European owners of power plants installed abroad?
On the other hand, a company that sells its electricity or gas on the open market makes superprofits because its cost price is fixed and its selling price determined by the market.
