EU countries agree to snap energy tariffs, move to cap gas prices

BRUSSELS (Reuters) – European Union countries agreed on Friday to impose emergency profits on energy companies’ windfall, and began talks on their next step to tackle Europe’s energy crisis — possibly imposing a cap on gas prices at the bloc’s level.

Ministers from 27 European Union member states met in Brussels on Friday, where they approved measures proposed earlier this month to contain rising energy prices that are fueling record inflation and threatening recession.

The package includes a tax on excess profits for fossil fuel companies made this year or next, another tax on excess revenue generated by low-cost energy producers from rising electricity costs, and a mandatory 5% cut in electricity use during peak price periods.

After concluding the deal, countries began talks Friday morning about the EU’s next step to contain the price crisis, which many countries want to be a cap on the price of gas, although others – most notably Germany – remain opposed.

“All these temporary measures are very good, but in order to find a solution to help our citizens in this energy crisis, we need to put an end to the price of gas,” Croatian Economy Minister Davor Filipovic said upon arrival at Friday’s meeting.

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

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

Countries have disputed the Commission’s claim that a broad cap on gas prices would require “significant financial resources” to fund emergency gas purchases if market prices exceed the EU ceiling.

Belgian Energy Minister Tine van der Straiten said only 2 billion euros ($1.96 billion) was needed because most European imports are on long-term contracts or arrive via pipelines without easy alternative buyers.

That would be a fraction of the €140 billion the EU expects to raise in windfall profits taxes on energy companies.

But Germany, Austria, the Netherlands and others warn that gas price caps could make countries struggle to buy gas if they can’t compete with buyers in competitive global markets.

An EU diplomat said the idea posed “risks to the security of supplies” as Europe approaches winter with energy supplies tight after Russia cut gas flows to Europe in retaliation for Western sanctions against Moscow for its invasion of Ukraine.

The European Commission has also raised doubts and suggested the EU should instead go ahead with setting a narrower price ceiling, targeting only Russian gas, or gas used specifically for power generation.

“We have to put a ceiling on the price of all Russian gas,” said Kadri Simson, the European Union’s chief energy policy officer.

Brussels proposed the idea earlier this month, but it met with resistance from central and eastern European countries worried that Moscow would respond by cutting off the remaining gas it still sends to them.

By introducing EU-wide measures, Brussels hopes to bypass governments’ asymmetric national approaches to the energy crisis, which has seen richer EU countries spend more than poorer ones distributing money to struggling businesses and consumers struggling with bills.

Germany, Europe’s largest economy, put in place a €200 billion package on Thursday to tackle rising energy costs, including the brake on gas prices.

Luxembourg Energy Minister Claude Turmes has urged Brussels to change EU state aid rules to stop a “crazy” spending race between countries.

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

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(Reporting by Kate Abnett and Gabriella Bachinska); Additional reporting by Philip Blinkensop, Bart Meijer and John Chalmers. Editing by Jean Harvey

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