The published plans show the EU will, for now, avoid major market interventions such as capping gas prices or taxing energy companies’ windfall profits
International News via Reuters:
The European Commission set out plans on Wednesday to cut electricity taxes and coordinate the summer refill of countries’ gas storage, as it seeks to cushion the energy fallout from the Iran war.
The published plans show the EU will, for now, avoid major market interventions such as capping gas prices or taxing energy companies’ windfall profits – measures it used in 2022 when Russia cut gas supplies and prices hit record highs.
The Commission said it would amend EU rules to ensure electricity is taxed less than gas, and make it easier for governments to cut industries’ and vulnerable households’ electricity taxes to zero, to curb their bills, confirming plans previously reported by Reuters.
UNANIMOUS APPROVAL NEEDED FOR TAX CHANGES
The Commission will publish legal proposals to change the tax rules in May. Tax changes require unanimous approval from EU countries, making them difficult to pass.
Europe’s heavy reliance on oil and gas imports has left it exposed to spiralling prices since the Strait of Hormuz, a vital fuel shipping route, was effectively closed. European gas prices have increased by a third since the U.S.-Israeli war with Iran began on February 28.
Still, gas prices remain far below 2022 levels and so far, the Iran crisis has not triggered fuel shortages in Europe, though airlines have warned jet fuel shortages could emerge in weeks. The EU’s biggest oil and gas suppliers – the U.S. and Norway – are outside the Middle East.
Brussels said it would also coordinate countries’ efforts to fill gas storage in the coming months, to avoid price spikes when a lot of firms rush to buy at the same time. It will advise countries on when and where to release emergency oil stocks.
The Commission will also work on measures to maximise capacity at Europe’s oil refineries, to shore up jet fuel supply and propose measures on how to distribute jet fuel imports between countries to avoid shortages.
EU officials told Reuters the bloc’s relatively restrained response reflects that national governments, rather than Brussels, control many crisis-management levers, including fuel subsidies and national tax cuts.
EU governments have already earmarked billions of euros from national budgets to cushion consumers from higher prices.
Some officials noted that the war-driven energy shock could last for months, making it prudent to hold back more extreme measures now, in case they are needed later.
In the longer term, the EU plans to replace fossil fuels with locally produced renewable and nuclear energy faster, to shield against future oil and gas supply shocks. The Middle East conflict has triggered less severe European power price spikes than in 2022, in part, because countries have significantly expanded renewable electricity.
The EU produced 71% of its electricity from renewables and nuclear energy last year, up from around 60% in 2022, data from think tank Ember showed.
Reporting by Kate Abnett; Editing by Mark Potter and Emelia Sithole-Matarise
