EU Gears Up To Tax Fossil Fuel Companies Amid Energy Crisis

The European Union is preparing to propose a plan that would force fossil fuel companies taking in windfall profits from surging oil and gas prices to submit financial contributions to offset soaring household energy bills, a draft document circulating around Brussels indicates.  

The European Commission is expected to release the details of the draft proposal this week, which would then require a majority vote from the 27-member bloc. 

The draft, sighted by Reuters, is also said to include bailouts for power firms that are at risk of collapse amid an intensifying energy crisis. 

Funds to be required from fossil fuels companies are dubbed a “solidarity contribution” by the draft document, and would target oil, gas, coal and refining companies based on “taxable surplus profits made in the fiscal year 2022”. 

“The solidarity contributions are justified by the fact that such companies make unpredictable surplus profits,” the draft said, as reported by Reuters, adding that the profits “do not correspond to any regular profit that these entities would or could have expected to obtain in normal circumstances”.

Bloomberg, which has also seen the draft, reports that the document referred to financial contributions from fossil fuels companies as an “exceptional and temporary” levy. 

The bill has a higher chance of gaining approval as it requires a majority vote rather than a unanimous one. 

If approved, the bill would install a minimum rate for a “solidarity contribution” from fossil fuels companies, while each EU member state could increase that rate, though not decrease it. 

The draft also indicates that the EU is gearing up to propose a mandatory power cut across the bloc, which is being interpreted as a move towards energy rationing as a stop-gap measure to avoid the spiraling of an energy crisis that has now been exacerbated by Russia’s cutoff of gas flows through Nord Stream 1. 

The power cut targets in the draft proposal, as seen by Bloomberg, seek to cut overall consumption, as well as to lower demand during selected peak hours during weekdays. 

The draft also discussed a cap on “excessive” revenue of non-fossil fuel power generating companies.