In order to counteract inflated costs, Ursula von der Leyen, the head of the EU, has called for reductions in electricity use across the union as well as windfall taxes on energy corporations.
She informed the European Parliament that gas and electricity costs had risen to record levels as a result of Russia’s invasion of Ukraine.
She demanded that electricity use during peak hours be reduced by at least 5%.
However, plans to limit the price of natural gas, a substantial Russian export to the EU, were put off.
In order to generate “extra revenues,” the Strasbourg proposal proposes skimming off the profits of low-carbon electricity providers and instituting a de facto windfall tax on the oil, gas, and coal sectors.
All 27 of the European Union’s member states would benefit from the anticipated €140 billion (£121 billion; $141 billion) in cash.
The maximum revenue allowed for businesses that produce power from low-carbon sources, including nuclear, solar, and wind, would be €180 per megawatt-hour (MWh).
On Wednesday, the front-year power price for Germany, the EU’s biggest economy, was trading at just under €500/MWh.
Power generators with lower operational costs “have been able to extract tremendous returns, substantially above what may have legitimately expected based on investment decisions,” claims Frans Timmermans, vice president of the European Commission.
Fossil fuel producers and refiners would be required to pay a windfall tax equaling 33% of their taxable surplus earnings.
The member states of the EU will carefully evaluate the proposals to reach an agreement by the end of this month.
Later on Wednesday, Ms. von der Leyen will discuss her second trip to Ukraine and its president, Volodymyr Zelensky. “Europe’s solidarity with Ukraine will remain steadfast,” she said in her announcement.
Olena Zelensky, Mr. Zelensky’s wife, attended the speech before the assembly as a special guest.
According to Ms. von der Leyen, struggling to make ends meet was “becoming a source of distress for millions of enterprises and people.”
Russia has so far mostly dodged the looming economic disaster that was predicted back in the spring when tough sanctions were imposed. Money from oil and gas sales has aided in mitigating the harm.
Ukraine has been formally requesting membership in the EU since June.
In order to repel Russian soldiers, it recently began a counteroffensive. This month, it reportedly recaptured thousands of square kilometers of ground in the east and south.
A financial conflict exists between the EU, which imposed harsh sanctions in response to the invasion, and Russia, a significant oil supplier.
Before the invasion, 40% of the gas that the EU imported was from Russia. It has dropped to about 10% since then.
This summer, European gas prices were around ten times higher than they had been on average during the preceding ten years.
Since some gas is consumed to create electricity, high gas prices also raise power bills.
Ms. von der Leyen claims that far in advance of a deadline in October, EU member states have successfully increased their winter gas supplies to 84% of capacity.
She mentioned the United States, Algeria, and Norway as “reliable” gas suppliers.
She also revealed plans to create a European Hydrogen Bank to promote up to €3 billion in investments in hydrogen as an environmentally friendly alternative to fossil fuels.
Cuts in electricity is EU’s way of taking the fight to Russia
A State of the Union address often covers a wide range of subjects, and this one was no different. Naturally, a lot has changed since Ursula von der Leyen’s previous address, which was a year ago.
The energy crisis is currently the union’s biggest issue due to Russia’s invasion of Ukraine. Although more extensive, long-term energy market reforms are being discussed, they won’t be ready until the next year, based on what I can observe.
Reducing consumption and putting de facto windfall taxes on energy providers are urgent fixes for high costs.
Read Also: Germany announces €6bn energy cost package
The head of the European Commission sought to demonstrate this winter how determined Europe is. She said that sanctions were “here to stay” against Russia. But, while the government and people of Ukraine will be keeping a tight eye on promises to pull their economy and orbit closer to the EU, questions remain regarding the EU’s willingness to impose more severe penalties against President Putin.
