Brussels comes with energy package, but there are still many uncertainties
It is called an ’emergency intervention’ by Brussels, which should have an effect at an unprecedented pace. This presented the European Commission with a proposal for tackling the energy crisis. These are three measures that are well understood on the energy market and, according to Brussels, should have rapid effects.
A levy on excess profits from that electricity production via renewable sources. Two: a capital tax for fossil fuel companies. Together they yield 140 billion euros, which can be divided up among European households and companies. The third plan is a mandatory 10 percent reduction in electricity consumption in the EU.
The coming weeks can support the plans. Those EU countries, former European Commissioner Frans Timmermans (Climate) on Wednesday, “all feel the urgency to act quickly, and we are now giving them the tools to do so”. At the same time, the proposals, which are put together quickly in Brussels, have a lot of loss ends. There are some uncertain factors.
The speed of implementation
First the plans. How quickly they can be implemented is very uncertain. Instead of a universal European tax measure, which would require unanimity, the Commission has opted for a European agreement that will have to be made mandatory by each EU country. There is a logic behind this: the energy market is organized slightly differently in each of them, and tax systems also differ greatly.
But it also means that there could be big differences in how quickly and how radically the charges are implemented. For the Netherlands, for example, it will already be beautiful. The energy market in the Netherlands is more liberalized than older people and many small players are active in electricity production. Whether the Netherlands succeeds in making gains quickly is uncertain. Just as uncertain as how one wants to distribute the money among citizens and companies.
Timmermans can’t help but ask publishing companies to “open the books” and then skim off profits. If it takes longer, the government should, according to him, advance compensation measures.
“The most important thing for me: that you now help people out,” said Timmermans, who also explicitly addressed The Hague. “I think the Netherlands should start now. The state must act now.”
It is called with a nice euphemism a ‘solidarity contribution’: the 33 percent levy on the surplus profit made by fossil companies in 2022. “In these times it is wrong to make the first profits – thanks to the war and at the expense of the war,” the committee chairman Urvon der Leyen said on Wednesday.
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But the implementation of this remains very unclear. The proposal targets ‘fossil companies with activities in the oil, gas, coal and refinery sectors’ operating in the EU and making a profit. But how do you force them to ‘solidarity’? “Shell and others also employ people who have multiple companies,” said Timmermans on Wednesday when asked. “They also see the lack of solidarity tensions results.” According to him, the ‘mild reaction’ of the fossil fuel companies to the EU plans shows that they are open to it. “Shell also has no use if citizens and companies fail.”
But if fossil companies are not lacking in ‘more awareness’, then Brussels can hardly take action. Here, too, the ball is in the exercise of an import tax. In the Netherlands, the government would like to impose a levy through an amendment to the Mining Act.
Solidarity within the EU
One of the reasons for the Brussels action plan: to avoid creating a patchwork of national measures. If the differences between them become too great, there will be skewed growth in the internal market. But at the same time, the plans now are not going to completely remove that risk.
For example, there are no rules for how countries distribute the money collected. The package can therefore be different for a Frenchman than for an Italian. There are also major differences in how countries obtain their electricity. To prevent the differences in what countries collect with the new tax from becoming too great, countries are entering into ‘solidarity agreements’ with each other and thus sharing income with each other. But how solidarity countries will be in practice remains to be seen.
A version of this article also in the newspaper of September 15, 2022