Wednesday

30th Nov 2022

Czech presidency proposes fossil-fuel tax compromise

  • The Czech proposal could reduce the amount liable under the windfall tax for most fossil-fuel companies (Photo: Gerry Machen)
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The EU's 27 energy ministers will meet for the third time this Friday (30 September) to discuss a set of response measures to the energy crisis.

Energy has now become the "main priority" of the Czech presidency, the country's minister of industry, Jozef Síkela, said at the EU Sustainable Energy Week on Monday.

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But Síkela also warned plans must be "fair and socially-acceptable even for the most vulnerable citizens."

In a draft document which will form the basis for Friday's negotiations, seen by EUobserver, the Czech presidency proposed a compromise that would reduce a plan to claw back fossil-fuel companies' profits.

In the original plan by the EU Commission put forward two weeks ago, fossil-fuel extractors would be asked to return 33 percent of taxable surplus profits for the 2022 fiscal year.

Profits 20-percent higher than the average profit of the last three years would qualify as "excessive".

The Czech presidency has now proposed extending the period back another year to 1 January 2018, which would increase the average profit for most companies and thus in turn reduce the amount liable for "solidarity" taxation.

Fossil-fuel criticism

Fossil fuel companies, including TotalEnergies, and oil and gas lobbyist FuelsEurope have pushed back against the original proposal because relatively meagre profits during the Covid-19 period skewed the calculation downwards they argued, making current profits seem higher.

In a September position paper, the Spanish petrochemical giant Repsol also noted the tax would be "counterproductive" for new energy investments.

According to Fitch credit-ratings agency, Repsol is one of the companies most affected by the tax.

But it dispelled the notion EU tax plans will hamper the strong performance of oil and gas companies and enured all companies affected by the windfall tax will keep generating a "healthy cash flow" due to high energy prices.

Nonetheless, Repsol CEO Josu Jon Imaz recently described the windfall tax as "discriminatory."

In a sponsored interview published by Politico on Monday, Imaz said Europe was engaged in an "ideological transition, not a scientific one," adding that it needed to prioritise "security of supply."

More leeway

The new Czech compromise also gives countries more leeway to select the hours at which electricity consumption has to be reduced, as long as the overall consumption reduction remains 10 percent.

The commission had also proposed a revenue cap on all power plants generating more than 20-kilowatt hours. This has now been increased to 1,000 kilowatts, which would exclude more generators from the limit.

Demand-reduction targets and revenue caps on power generators will not be mandatory in so-called "outermost regions" not connected to the EU electricity grid, including Cyprus and Malta.

Member states will debate the Czech proposal on Friday.

Analysis

Investors in renewables face uncertainty due to EU profits cap

While a cap on revenues from renewables is aimed at redirecting excess profits from low-cost electricity generation back to consumers, analysts and industry groups argue such measures come with risks — and at a bad time.

EU unveils energy crisis plan, but warns of difficult 'winters'

Crisis measures include imposing cuts in power-consumption across the bloc, a cap on the excess revenues made by renewable and nuclear energy, and a "solidarity mechanism" to channel the massive and unexpected profits of fossil fuel firms to citizens.

Investigation

Asbestos — two to three times more deadly than known

Where once working men in heavy industry were diagnosed with cancers related to a more direct exposure to asbestos, now women in professions such as teaching, nursing and other occupations are being diagnosed, as well as young people.

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