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    Spain, Germany and the UK move forward with energy mitigation measures

    September 30, 2022 - CE Noticias Financieras


      Spain, Germany and the United Kingdom are some European countries where new measures will come into force to combat the crisis triggered by the end of energy imports from Russia, as part of the sanctions for its invasion of Ukraine.

      In Spain, the VAT (consumption tax) on gas will fall from 21% to 5% starting in October, a measure that will initially remain in force until the end of this year, but that may extend until 2023, "while the very difficult situation" of "nonsensical and crazy increases" in energy prices lasts, according to Prime Minister Pedro Sánchez, on September 1st, when he announced the lowering of the tax.

      The country has also already lowered, in July, the VAT on electricity to 5%, the lowest rate allowed in the European Union, and in total, over the past year, there has been an 80% reduction in the tax burden on electricity.

      In parallel, Spain has had an energy-saving plan in effect since August 10 that imposes maximum and minimum temperature limits for air conditioning and heating in public buildings, commercial spaces, bus and train stations, airports, and cultural spaces.

      Air-conditioned spaces that face the street must also have systems that keep the doors closed.

      In addition, shop window lighting must be turned off after 10 pm, as must lights in public buildings when they are unoccupied.

      The Spanish government has also recommended increasing telecommuting in "large companies" so that there is less travel and less costs with air conditioning of buildings and other energy consumption.

      The executive said it is working on a broader plan for saving and efficiency in energy consumption, which it will soon present in Brussels, but it is not yet known what other measures are planned.

      In Germany, Economy Minister Robert Habeck presented a new package of energy-saving measures to be implemented in three phases, the second of which will start as early as October 1.

      In addition to measures to make large buildings more energy-efficient, companies with an energy consumption of 10 GWh or more per year are to take energy-efficiency measures as early as the beginning of October that include, for example, replacing lighting with LEDs and optimizing work processes and technical systems.

      To help Germans cope with the price hike caused by the energy crisis, the government approved a third aid package on September 14.

      Among the measures announced by the Chancellor, Olaf Scholz, which are now starting to be implemented are the imposition of a profit cap for electricity producers, a freeze on electricity prices for families and small and medium-sized businesses up to a certain level of consumption, one-off subsidies for pensioners (300 euros) and students (200 euros), and the introduction of a new nationwide monthly pass for public transport.

      A reduction in the VAT rate on gas from 19% to 7% is planned to be in effect until March 2024. In the same period, a surcharge will be levied on the purchase of gas. Like the charge for gas supply, this surcharge will be subject to value added tax.

      In the UK, two days after entering office, the Prime Minister, Liz Truss, announced on September 8 a package to freeze domestic energy prices until September 30, 2024, avoiding the 80% increase scheduled for October 1.

      The so-called Energy Price Guarantee sets the cost of electricity and gas so that a typical British household will pay on average about 2,500 pounds a year (2,800 euros at the current exchange rate) for the next two years, starting October 1 of this year.

      The unit price will be capped at 34 pence (0.38 cents) per kilowatt per hour for electricity and 10.3 pence (11.6 cents) per kilowatt per hour for gas, including VAT, which remained at 5 percent, plus fixed daily rates of 46 pence (52 cents) for electricity and 28 pence (31 cents) for gas.

      According to the British government's calculations, a family with average consumption will save about 1,000 pounds (1,121 euros) a year, thanks in part to the suspension of social and environmental taxes.

      This package is in addition to Energy Bills Support Scheme of 400 pounds for all households, paid in six monthly instalments starting in October directly through a discount on bills, and to non-household users (Energy Bill Relief Scheme), such as businesses, public bodies like schools or hospitals, and non-profit organizations for the next six months until March 31, 2023.

      For these users, the final figure will only be announced on Friday.

      The VAT rate on energy for businesses is 20%, but goes down to 5% for schools or social organizations.

      The British government estimates that in total these measures will cost around 60,000 million pounds (67,300 million euros) in the first six months, which will be borne out of public debt rather than extraordinary taxes on energy company profits, as the opposition argues.


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