EU countries to back windfall energy levies and lock horns on gas price cap

BRUSSELS, Sept 30 (Reuters) – European Union countries meet on Friday to approve emergency levies on windfall profits from energy companies and launch talks on their next move to tackle Europe’s energy crisis – possibly a gas price cap.

Energy ministers from the 27 EU member countries are negotiating measures proposed by Brussels last week to try to contain a spike in energy prices that is fueling record inflation and threatening recession.

They include a levy on the excess profits of fossil fuel companies made in 2022 or 2023, another levy on the excess revenues that low-cost power generators derive from soaring electricity costs, and a mandatory reduction in 5% of electricity consumption during peak periods.

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Diplomats from several countries were confident ministers would approve the package on Friday.

Afterwards, ministers will turn their attention to the EU’s next move to contain the price crisis – which many countries say should be a wide gas price cap, while others – notably Germany – remain opposed.

“On price caps, there is nothing close to a consensus,” said a diplomat from an EU country.

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

Europe should cap gas prices at a level “sufficiently high and flexible to allow Europe to attract the necessary resources”, Belgium, Greece, Poland and Italy said in a note explaining their proposal, seen by Reuters on Thursday evening.

Opponents include Germany and the Netherlands, which say gas price caps could prevent countries from attracting supplies if they cannot compete with buyers in world markets at competitive prices for cargoes. gas this winter.

A diplomat from an EU country said the idea presented “significant weaknesses and risks to security of supply” as Europe heads into a winter with little energy to spare, after Russia cut gas flows to Europe in retaliation for Western sanctions against Moscow for invading Ukraine. .

The European Commission has also expressed doubts and suggested the EU move forward with more limited versions of a price cap.

A wholesale gas price cap would require “significant financial resources” and could only work if a new entity was launched to allocate and ship scarce fuel supplies between states, the Commission said in a document released Thursday.

EU countries should instead consider capping the price of Russian gas or launching an EU price cap specifically on gas used for power generation, he said.

The Commission suggested a cap on Russian gas prices earlier this month, but scrapped the idea after resistance from central and eastern European countries feared Moscow would retaliate by cutting off the remaining gas it still sends them. .

Belgian Energy Minister Tinne Van der Straeten said countries in favor of the price cap would step up their efforts to find a proposal that more EU countries could support.

“We will take additional measures with Germany, with Austria, with all those countries which today still have reservations,” she said on Thursday.

She added that only €2 billion would be needed to fund emergency gas purchases if prices exceeded the EU cap, as most European imports are under long-term contracts and/or arrive via pipelines. without other easy buyers.

That, she said, pales in comparison to the sums spent by individual EU countries to help their consumers cope with runaway prices.

Berlin put in place a 200 billion euro ($194 billion) “defensive shield” on Thursday, including a gas price curb and a fuel sales tax cut, to protect businesses and households Germans from the impact of soaring energy prices.

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Reporting by Kate Abnett, Gabriela Baczynska; additional reporting by Philip Blenkinsop, Bart Meijer; Editing by Toby Chopra

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