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At the end of last week, EU energy ministers approved a first package of emergency measures designed to curb the rise in electricity bills, help families in difficulty and coordinate Member States’ responses to the energy crisis. The package arrives after less than a month of negotiations and includes measures such as mandatory energy savings, a cap on excess market revenue and a forced levy to capture excess corporate profits. At the moment noNo EU-wide price cap for importing gasa measure that Italy was clamoring for and which remains in the study for future adoption.
The moment is critical and the increases are there for all to see, and for the first time inflation in the eurozone has reached and exceeded 10%, a trend that is clearly driven by the surge in the prices of energy bills. The EU has therefore decided to act in two different directions: on the one hand it aims to reduce electricity consumption during peak hours, on the other hand to use part of the exaggerated earnings that energy companies have had due to inflated prices cause speculation.
The discussion started on Friday morning and a few hours later the ministers reached an agreement introducing three main measures to be adopted upon expiry until the situation normalizes, which we report below.
- Energy saving: a mandatory target of reducing consumption by 5% during peak hours, i.e. when gas plays the most important role in determining prices, has been set, in addition to a voluntary reduction of 10% of the total electricity demand by countries.
- Excess revenue ceiling: which concerns the revenues made by power plants that do not use gas to produce electricity, such as solar, wind, nuclear, hydroelectric and lignite. The cap will be uniform and set at 180 euros per megawatt hour. Any revenue that goes beyond this hurdle will be collected by governments.
- Profit redistribution: the latter measure is closely linked to the previous one and again concerns energy companies. It provides for a solidarity mechanism that aims to redistribute excess profits made by fossil fuel companies (crude oil, gas, coal and refinery). Competent authorities will have the power to impose a 33% levy on the profits made by these companies in fiscal year 2022, as long as the profits represent a 20% increase from the average since 2018.
The extra funds obtained through the second and third instruments will be used for each state to produce subsidies and income support measures for all households and businesses in financial difficulty. In the event that any member state has already taken similar directions, it can continue in the same way, as long as it maintains the direction imposed by the European Union.
This package is a first step forward to tackle the energy crisis at a time which, with winter just around the corner, appears particularly delicate for the entire European area. However, although it represents a decisive step in the right direction, it is common opinion that other measures will need to be implemented to mitigate the loss of purchasing power of households and businesses.
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