EU countries approve unexpected energy taxes, move to gas price ceiling

  • The EU approves unexpected energy taxes
  • Countries see gas price caps as their next move
  • The states are divided on how to keep sky-high prices

BRUSSELS, Sept 30 (Reuters) – European Union countries agreed on Friday to impose emergency taxes on energy companies’ windfall profits, beginning talks on their next move to tackle Europe’s energy crisis – possibly 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 an energy price rise that is fueling record inflation and threatening a recession.

The package includes a tax on fossil fuel companies’ profits this year or next, another tax on excess revenue low-cost power producers make from skyrocketing electricity costs, and a mandatory 5% cut in electricity use during high price periods.

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With the agreement concluded, countries began talks on Friday morning about the EU’s next move to limit the price crisis, which many countries want to be a broad price ceiling for gas, although others – especially Germany – are still opposed.

“All these temporary measures are very good, but to find the solution to help our citizens in this energy crisis, we need to put a cap on gas prices,” Croatian Economy Minister Davor Filipovic said as he arrived at Friday’s meeting.

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

The cap should be set at a level that is “high and flexible enough to allow Europe to attract the necessary resources”, Belgium, Greece, Poland and Italy said in a memo explaining their proposal seen by Reuters on Thursday.

The countries disputed the Commission’s claim that a broad gas price ceiling would require “significant financial resources” to finance emergency gas purchases if market prices breach the EU ceiling.

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

It will be a fraction of the 140 billion euros the EU expects the unexpected profit taxes on energy companies to increase.

But Germany, Austria, the Netherlands and others warn that broad gas price caps could leave countries struggling to buy gas if they cannot compete with buyers in price-competitive global markets.

A diplomat from an EU country said the idea posed “security of supply risks” as Europe heads into a winter of tight energy supplies after Russia cut gas flows to Europe in retaliation for Western sanctions against Moscow for invading Ukraine.

The European Commission has also raised doubts and proposed that the EU instead proceed with narrower price ceilings, aimed at Russian gas alone, or specifically gas used for power generation.

“We must offer a price cap for all Russian gas,” said EU energy policy chief Kadri Simson.

Brussels proposed that idea earlier this month, but it ran into opposition from central and eastern European countries worried that Moscow would retaliate by cutting off the remaining gas it still sends to them.

By introducing EU-wide measures, Brussels hopes to patch up the authorities’ uneven national approaches to the energy crisis, which has seen richer EU countries spend far better than poorer ones handing out money to ailing companies and consumers struggling with bills.

Germany, Europe’s biggest economy, unveiled a 200 billion euro package on Thursday to tackle soaring energy costs, including a gas price brake.

Luxembourg’s energy minister Claude Turmes called on Brussels to change EU state aid rules to stop the “crazy” money race between countries.

“It is the next frontier, to get more solidarity and to stop this conflict,” said Turmes.

($1 = 1.0182 euros)

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

Our standards: Thomson Reuters Trust Principles.

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