The European Commission has announced proposals for emergency intervention in Europe's energy markets to tackle recent dramatic price rises. Among other things, this includes a temporary solidarity contrition on the surplus profits of companies in the oil, gas, coal, and refinery sectors. The solidarity contribution will be imposed at a rate of at least 33% on 2022 profits that exceed a 20% increase on the average profits of the previous three years. Further details on the solidarity contribution are provided in a Q&A on the emergency intervention as follows:
6. How will the solidarity contribution by fossil fuel companies work, and how was the level chosen?
The Commission has proposed an exceptional solidarity contribution from companies in the oil, gas, coal and refinery sectors, to ensure that the whole energy sector pays its fair share in these difficult times for many to address the extraordinary energy crisis resulting from the weaponisation of the energy supply by Russia.
This solidarity contribution will complement the revenue cap on inframarginal technologies and targets the surplus profits that the fossil fuel industry has made due to the energy crisis. It will be collected by Member States on 2022 profits which are above a 20% increase on the average profits of the previous three years, at a rate of at least 33%. This approach of setting a minimum rate ensures that the solidarity contributions are both fair and proportional.
Establishing this solidarity contribution as a European instrument will ensure that negative spillovers within the internal energy market stemming from uncoordinated national measures can be avoided and risks of litigation between companies and governments can be reduced substantially. Moreover, a coordinated approach will also ensure consistency with the objectives of REPowerEU.
Member States will be in charge of collecting the solidarity contribution, and redistributing the profits subject to compliance with Union law. The revenues from the solidarity contribution should be used to provide financial support measures to households, especially vulnerable households, and hard-hit companies to mitigate the effects of high energy prices, as well as to help the reduction of energy consumption, support energy-intensive industries, promote investments by final customers in renewables, energy efficiency or other decarbonisation technologies; and cross-border projects in line with the REPowerEU objectives.
The solidarity contribution is proposed as an exceptional measure to mitigate the impact of the energy crisis on households and companies across the EU. Tackling energy poverty and addressing the social consequences of the crisis, in particular to protect workers in exposed industries, are also a matter of European solidarity. Member States should focus, in particular, on those most affected by the soaring energy prices. This includes vulnerable households and energy intensive companies or those under pressure to accelerate their green transition.
To maximise the impact of the solidarity contribution and prevent the risk of fragmentation of the Single Market, Member States should act in a spirit of solidarity and devote a share of the revenues to the common financing of measures to reduce the harmful impact of the energy crisis or to promote investments in renewables and energy efficiency.