The EU government is retreating from imposing a value cap on Russian fuel, however pushing forward with windfall taxes on vitality firm “surplus” income, in line with a leaked doc.
A draft regulation on the “electrical energy emergency instrument” seen by the Guardian accommodates neither a value cap on Russian fuel nor on imported fuel, after member states had been unable to agree on restrictions final week. The EU is anticipated to levy windfall taxes on the excessive income of fossil gas firms, with a separate cap on revenues of low-carbon electrical energy producers.
The European Fee president, Ursula von der Leyen, is anticipated to publish Europe’s plan on coping with surging electrical energy costs when she makes her annual state of the union speech on Wednesday.
The ultimate textual content may nonetheless change, however the draft reveals the Fee’s doubts over gaining sufficient help from EU member states for its most well-liked possibility of placing a cap on Russian fuel in response to what it has referred to as the Kremlin’s weaponisation of provide.
EU member states that import giant quantities of fuel from Russia, together with Hungary, Slovakia and Austria, have spoken out towards a cap on Russian fuel as a result of they concern the Kremlin would halt all fuel flows, plunging their international locations into recession. The Russian president, Vladimir Putin, has already threatened to halt vitality exports to Europe if such a plan is agreed.
A couple of dozen international locations, together with France and Poland, wish to impose a value cap on all imported fuel, which they see as a greater method to curb surging costs. The Fee is unenthusiastic about this concept, as a result of it fears the EU would lose out to international locations ready to pay extra within the extremely aggressive marketplace for liquefied pure fuel.
The Netherlands and Denmark are cautious of any value cap, whereas Germany fears a value cap on Russian fuel can be divisive.
With member states divided, the Fee, which is answerable for drafting EU authorized proposals, is pursuing measures that unite the 27-member membership. EU governments are largely supportive of capping the value of electrical energy from low carbon sources, corresponding to renewables or nuclear, and recycling these funds to weak households and companies.
Oil and fuel firms will face a separate windfall tax, described as a “solidarity contribution”. Within the leaked paper, the fee estimates that there will probably be a fivefold enhance in oil, fuel and coal firms’ income in 2022. These “surplus” and “surprising” income, don’t end result from any financial or funding selections, states the fee, however “unpredictable developments within the vitality markets following the continued unlawful conflict in Ukraine”. No price for the windfall tax is proposed within the textual content.
Member states are additionally referred to as on to agree a binding goal to scale back electrical energy use throughout peak hours, though no quantity has been proposed.
Europe was grappling with surging fuel costs even earlier than the conflict in Ukraine. Constraints on provide have been compounded by the record-breaking dry summer season of 2022 that has pushed up demand for air-conditioning, whereas lowering hydropower from rivers and reservoirs. Including to the pressure, half of France’s ageing fleet of nuclear reactors have been pressured offline due to questions of safety, reversing the nation’s conventional position as exporter of electrical energy to its neighbours.