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EU proposes tax breaks to shield users from energy rally

EU proposes tax breaks to shield users from energy rally

2 min. 13.10.2021 From our online archive
Short-term cuts and financial aid to industry among measures announced by European Commission on Wednesday
EU Commissioner for Energy Kadri Simson holds a press conference in Brussels on Wednesday
EU Commissioner for Energy Kadri Simson holds a press conference in Brussels on Wednesday
Photo credit: AFP

The European Union has laid out its can-do list for member states to help protect its most vulnerable companies and households from the unprecedented surge in energy prices. 

The rally in natural gas to power and emission permits is hurting everyone from German chemicals producers to Spanish households just as the economy is recovering from the pandemic. Calls for coordinated action are getting louder and the bloc said on Tuesday it expects high prices through the winter. 

Measures include short-term tax cuts for parts of the population and aid to industry to cope with rising costs, according to a communication from the European Commission on Wednesday that will also be presented at the bloc’s summit to the national leaders at their meeting next week. The plan is designed to support the green transition without increasing the use of fossil fuels. 

“The current situation is exceptional, and the internal energy market has served us well for the past 20 years,” said Kadri Simson, the EU’s Energy Commissioner. “But we need to be sure that it continues to do so in the future.”

EU energy ministers will also hold an emergency meeting on October 26 to discuss the crisis, according to two EU diplomats.

The surge in prices is a wake-up call, said a senior EU official before the release of the communication, adding that it requires a rapid and joint response by member states and institutions. 

The measures highlight the limits of what the EU can do in the short-term to address the surge in demand at times of limited supply. Wednesday’s toolbox announcement amounts to an overview of existing measures, with recommendations on how to use them. 

Simson said on Tuesday that many analysts expect prices to fall back in spring. Gas storage levels, at their lowest in more than a decade for this time of year, are “tight,” but should be enough to meet demand, she said. 

The EU currently has storage capacity for more than 20% of its annual gas use, but not all member states have storage facilities and their use and obligations to maintain them vary.

The bloc’s executive branch will also examine medium-term options for the joint purchase and storage of natural gas, a move that could reduce the dependence on foreign suppliers such as Russia. 

The EU’s answer to the crisis will be to generate even more renewable energy under its green deal plans to become climate neutral by 2050, according to the communication. 

The bloc has been under pressure to detail how member states can help their citizens without contravening rules over issues like state aid.

©2021 Bloomberg L.P.

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