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    EU reveals that it will use energy tax looting to pay for green plans and that only part of it will lower electricity prices

    September 16, 2022 - CE Noticias Financieras


      Brussels wants to collect 140,000 million euros from energy companies. It does not accept Pedro Sánchez's model, but has looked for another mechanism to fiscally hit the companies and keep part of their profits. The excuse for collecting these profits is that this money will be used to reduce the electricity bill of end consumers. However, the truth is that the European Commission's own text acknowledges that this heavy tax hit will only go partly to reduce the energy bills of families and companies. The document does not specify how much will end up going to it and, nevertheless, it lists a whole list of additional purposes to which countries will be able to direct the umpteenth tax blow. Among them, to finance green projects, to pay for public energy infrastructures or for reforms to install solar panels.

      The Brussels document stresses that "the deliberate use of gas flows as a weapon by Russia has created unprecedented volatility and uncertainty in the EU and world energy markets". As a result, "gas prices in Europe have soared and have an impact on electricity prices when gas is used for power generation".

      The EU explains that"this summer, the situation has worsened as droughts and heat waves caused by climate change have reduced electricity generation and increased demand". But, in the face of this, the Commission has not chosen to help, for example, electricity generation based on nuclear power plants.

      No: "The Commission proposes an emergency intervention with three tools to help Europeans pay their bills" and, beware, to "accelerate the ecological transition". For this, the EU requires "reducing electricity consumption", with a reduction in overall electricity demand of at least 10%. And with an "obligation for Member States to reduce demand during peak hours by at least 5%".

      And it is that"Member States will be free to choose the measures to achieve this reduction in demand". But they should "consider economically efficient and market-based measures, such as auctions or tendering schemes for demand-side response or non-consumed electricity."

      But another part of the document is purely tax-raising. By way of taking profits away from energy companies through caps on the prices of energy sources used in electricity generation. Or by way of charging 25 billion euros in new taxes on energy obtained from fossil fuels (natural gas, oil and coal).

      "The "infra-marginal" electricity producers have made exceptional profits because high gas prices have pushed up the wholesale price of electricity, while their generation costs have remained low," Brussels says. So the EU wants to implement caps that would allow it to keep E117 billion of the energy companies' current profits.

      But how will that money be used? That is the big question. And it is not true that the answer is exclusively that this money has to be used to reduce the electricity bill, as Brussels says.

      The options are wide, without clear limits, and some very political:

      "Examples of how Member States can use these revenues: compensating electricity customers for reducing their consumption; or direct transfers to customers; or compensating suppliers that deliver electricity to customers below cost; or reducing customers' electricity costs for limited volumes; or encouraging customers' investments in renewables and energy efficiency." Only the latter can be watched with great voracity by the environmentalist parties.

      The same applies to the part that is openly recognized as a tax on fossil fuels. Brussels wants to extract 25 billion euros from this. And it will not go only to lowering the electricity bill. The options are wide-ranging and, once again, highly political:

      "1- Financial support for energy end-consumers , including households, especially vulnerable households and businesses.

      2- Reducing energy consumption, including through incentives for demand reduction and promoting end-user investments in renewable energy, energy efficiency or other decarbonization technologies.

      3- Providing financial support to companies in energy-intensive industries whenever they are investing in renewable energy or energy efficiency.

      4- Financing of cross-border projects in line with the REPowerEU objectives.

      5- Joint financing of measures to protect employment or promote the green transition".

      In short: we will have to see how much of the reduction in electricity prices will end up, but what is clear is that the temptation for it to be little will be great.


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