EU APPROVES WINDFALL TAX ON ENERGY FIRMS

  • 30/09/2022

In order to penalise energy companies for their record profits, the European Union has decided to enact emergency measures. Ministers have agreed to mandated reductions in electricity use as well as windfall taxes on specific energy companies.

The plan calls for levies on the excess profits of fossil fuel companies and the excess money derived from rising electricity prices. Families and businesses are anticipated to benefit from the funds raised. On whether and how to impose a cap on the wholesale price of gas, however, the bloc is divided.

It happens as Europe prepares for a challenging winter brought on by the rising cost of living and the tightening of the world's energy supplies. The bloc is largely trying to wean itself off Russia energy but it has left it scrambling for other alternative, expensive, sources.

A windfall tax is imposed by a government on a company to target firms that were lucky enough to benefit from something they were not responsible for - in other words, a windfall profit.

Energy firms are getting much more money for their oil and gas than they were last year, partly because demand has increased as the world emerges from the pandemic and more recently because of supply concerns due to Russia's invasion of Ukraine.

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