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2024 | OriginalPaper | Buchkapitel

The Use of Windfall Taxes on the Energy Sector to Support the Green Transition in the EU

verfasst von : Karolina Tetłak

Erschienen in: Sustainable Finances and the Law

Verlag: Springer Nature Switzerland

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Abstract

On 6 October 2022, Council Regulation (EU)2022/1854 on an emergency intervention to address high energy prices was adopted. The regulation introduced two fiscal measures: A “temporary solidarity contribution” imposed on the oil, gas, coal, and refinery sector to recover surplus profits generated during the fossil fuel crisis and a “cap on market revenues” for electricity producers. The regulation also outlines the use of these revenues in the Member States of the European Union (EU). The objective of this chapter is to demonstrate that these EU policy measures serve as fiscal instruments for accelerating the green transition. By imposing tax measures on windfall profits resulting from the energy crisis and requiring the Member States to use the proceeds for the purposes listed in the regulation, the EU created a redistribution tool to support its transition to renewable resources. The chapter examines in detail whether the solidarity contribution and the cap on market revenues as defined in the regulation can effectively contribute to sustainable financing as part of the EU’s energy and climate policy measures.

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Vorheriges Kapitel International Fiscal Cooperation to Better Integrate Public and Private Efforts on Sustainability: The Case of Carbon Offset Credits

Nächstes Kapitel The European “Fit for 55” Package and the Portuguese Tax Benefits System: Prospective Analysis and Reform Proposals

Council Regulation (EU)2022/1854 on an emergency intervention to address high energy prices of 6 October 2022 (OJ L 261I, 7.10.2022, pp. 1–21; hereafter referred to as Regulation).

Commission proposal of 14 September 2022 for a Council Regulation on emergency intervention to address high energy prices (COM(2022)473).

Recital (14) of the Preamble of the Regulation.

Recital (50) of the Regulation states: “Without substantially changing their cost structure and increasing their investments, Union companies and permanent establishments generating at least 75% of turnover with activities in the crude petroleum, natural gas, coal and refinery sectors, have seen their profits spike due to the sudden and unpredictable circumstances of Russia’s war of aggression against Ukraine, reduced supply of energy and increasing demand due to record high temperatures”.

See also Erdős and Czoboly (2023), pp. 36–41.

Zodrow (1988), pp. 387–424. https://doi.org/10.1177/109114218801600401. Access: 17 August 2023.

Chennels (1997), pp. 279–291.

Drapkin and Verleger (1981), p. 631; Matikonis (2022), pp. 330–340.

McIntyre (1981), p. 705; Feldstein (1976a), pp. 123–130.

Tickell (1998), pp. 83–90. http://www.jstor.org/stable/20003853. Access: 17 August 2023.

See Matikonis (2023), pp. 8–19.

Gamponia and Mendelsohn (1985), pp. 165–181, https://doi.org/10.2307/1885740, access: 17 August 2023.

Van der Ploeg and Venables (2011), p. 1, https://doi.org/10.1111/j.1468-0297.2010.02411.x, access: 17 August 2023; Goode (1987), pp. 159–169.

Feldstein (1976b).

Based on Article 2, for the purposes of this regulation, the definitions in Article 2 of Directive (EU) 2019/944 and in Article 2 of Regulation (EU) 2019/943 apply.

In the original version of the draft, the catalog did not include petroleum products, but crude shale oil was included in the list.

The explanatory memorandum to the proposal for a regulation further notes that: “If gas and coal-fired power plants were subject to an income ceiling, they would not be able to cover their operating costs and would be forced out of the market.”

Position paper on draft Council Regulation proposing a price cap on electricity producers’ market revenues COM(2022)473, 25.9.2022, https://www.eurelectric.org/publications/position-paper-on-draft-council-regulation-proposing-a-price-cap-on-electricity-producers-market-revenues-com-2022-473/ [access: 6.02.2023].

Ibidem.

The report commissioned by the European Commission shows the value of subsidies that the EU-28 countries allocated in 2012 to support individual energy sectors. The largest support was received by solar energy (EUR 14.7 billion), onshore wind energy (EUR 10.1 billion), biomass power plants (EUR 8.3 billion), hydropower (EUR 5.2 billion), and subsidies for offshore wind energy amounted to EUR 1.3 billion. On the other hand, among the sectors of conventional energy in the EU, in 2012, the biggest support was given to coal energy (EUR 10.1 billion), nuclear energy received EUR 7 billion, and gas energy—EUR 5.2 billion. The value of energy subsidies granted by the Polish Government in 2012 amounted to EUR 970 million. The Germans paid more—EUR 25 billion, the British—EUR 13 billion, the Spaniards—EUR 10.4 billion, and the Italians—EUR 10.3 billion (Ile kosztuje produkcja energii z węgla, gazu, atomu, wiatru i słońca?, Gramwzielone.pl, 14.10.2014, https://www.gramwzielone.pl/trendy/13075/ile-kosztuje-produkcja-energii-z-wegla-gazu-atomu-wiatru-i-slonca [access: 6.02.2023].

A similar tax introduced in the United States in 1980 was considered an excise tax and not a profit tax (see Lazzari 2006, p. 28, https://liheapch.acf.hhs.gov/pubs/oilwindfall.pdf, access: 17 August 2023).

See broadly: Tetłak (2022), pp. 188–201.

1 megawatt hour (MWh) equals 1000 kWh of energy. In turn, 1 kilowatt-hour (kWh) is a unit of work, energy, and heat that corresponds to the amount of energy consumed by a device with a power of 1000 watts, i.e. one kilowatt, for an hour. The megawatt hour (MWh) is used as a unit of measurement in industry, for example, to indicate the amount of energy produced annually by power plants.

See Thuronyi (2000), p. 434.

Article 2 point 24 of Regulation (EU) 943/2019. Interestingly, “project which demonstrates a technology as a first of its kind” is ambiguous, and it is not clear whether the project is to be the first project of this type or the technology being demonstrated.

The fiscal year is determined by reference to the rules in place under Member States’ national law.

Recital (63) of the regulation.

The common financing aspect covers both project-based cost-sharing between Member States and channeling through a Union instrument on the basis of Member States voluntarily assigning revenues to the Union budget in a spirit of solidarity.

Baunsgaard and Vernon (2022), p. 2.

See e.g., Veress (2023), pp. 264–268.

Report from the Commission to the European Parliament and the Council on the review of emergency interventions to address high energy prices in accordance with Council Regulation (EU) 2022/1854, June 5, 2023.

Lammers and Kuźniacki (2023), pp. 451–471.

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Titel: The Use of Windfall Taxes on the Energy Sector to Support the Green Transition in the EU
verfasst von: Karolina Tetłak
Verlag: Springer Nature Switzerland
Buch: Sustainable Finances and the Law
Print ISBN: 978-3-031-49459-8

Electronic ISBN: 978-3-031-49460-4

Copyright-Jahr: 2024
DOI: https://doi.org/10.1007/978-3-031-49460-4_13