Market: The European Commission will propose a tax on windfall profits in the energy sector, according to a source

BRUSSELS (Reuters) – The European Commission will propose to its members to tax the profits that companies in the energy sector have made during the recent spike in gas prices and to invest the proceeds in renewable energies and energy-saving renovations, a source with knowledge of the matter said Monday.

Governments will also be encouraged to use the proceeds to support consumers and industries affected by higher electricity prices, as long as this compensation does not distort the European market.

The proposal, which is due to be published next week and could be amended before publication, does not provide for the introduction of an EU-wide tax. Rather, it would indicate to governments that they can introduce such taxes at national level without breaking EU rules.

Gas prices reached record highs last year and have since remained at high levels. They climbed again on Monday on concerns about supply disruptions after Russia, Europe’s biggest gas supplier, invaded Ukraine.

According to Brussels, one solution to improve Europe’s energy security and reduce its exposure to the volatility of fossil fuel prices would be to accelerate the transition to renewable energies, renovate buildings so that they consume less energy and to help industry invest in less energy-intensive processes.

These plans are part of the EU climate change policies that EU countries and the European Parliament are currently negotiating and which this proposal would complement.

An early version of the proposal, seen by Reuters, would also require EU countries to secure gas stocks ahead of winter to guard against supply shocks, and to speed up the granting permits for new wind and solar farms.

(Report Kate Abnett and Foo Yun Chee; French version Camille Raynaud, edited by Nicolas Delame)

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