Europe Considers Energy Price Cap, Windfall Tax Amid Russia Risk

Europe is considering unprecedented interventions in the energy market, including price caps, reducing power demand and windfall taxes on profits as surging prices threaten the economy and push households toward poverty.

Russia has cut gas supplies to the continent, sending power prices soaring and tipping the economy toward a recession. The risk of further disruptions is increasing as the region prepares for a tough winter, according to Mechthild Woersdoerfer, senior energy official at the European Commission. That would deepen the damage, which is forcing the European Union to devise plans to step in.

A concrete plan

The commission, the EU executive arm, is going to come up with a concrete plan later this month, Woersdoerfer told members of the European Parliament’s industry committee Thursday. Commission President Ursula von der Leyen will provide an outline of the measures in her annual address on Sept. 14.

“We’re well aware that the prices are affecting vulnerable consumers so we need to help them,” she said, adding that the impact was spreading to middle-income households and industry.

European natural gas prices have declined in recent days after reaching a high last week, but are still more than four times higher than they were a year earlier. Electricity also remains elevated.

The EU has already agreed to seek alternative sources of gas, boost the share of renewables, bolster gas storage requirements and set a voluntary demand reduction cut to help survive the winter without blackouts. Thirteen of its members have already been affected by Russia’s gas supply cuts.

“The situation remains very, very critical,” Woersdoerfer said. “There is a risk of disruption which is very strong, even getting stronger, as already half of our member states are affected totally or partially.”

Emergency meeting

The bloc’s energy ministers are due to discuss how to respond to the crisis at an emergency meeting next week. More and more governments are demanding a tool to limit the spike in electricity prices, though views on how it should be designed vary. The commission is due to put forward regulatory proposals after listening to member states and talking to the European Parliament, Woersdoerfer said.