The European Union’s executive outlined plans on Wednesday to raise more than $140 billion from energy firms to help shield households and businesses from soaring prices that threaten economic recession and insolvencies.
European gas and power prices have rocketed this year as Russia cut fuel exports to retaliate for Western sanctions over its invasion of Ukraine, leaving many struggling to pay bills and utilities grappling with a liquidity crunch.
The European Central Bank’s chief economist said these higher prices remain a “dominant driving force of inflation” in the euro zone.
European governments have responded with measures ranging from capping consumer electricity and gas prices to offering credit and guarantees to power providers at risk of collapse.
“EU Member States have already invested billions of euros to assist vulnerable households. But we know this will not be enough,” European Commission President Ursula von der Leyen told the European Parliament.
In separate steps to try and protect consumers from record-high inflation, France announced new energy price caps for 2023 and Denmark prepared its own temporary ceilings on energy bills.
And in Germany, Uniper, its largest importer of Russian gas, said the government could take a controlling stake to help it cope with the crisis, and a local utilities industry group warned of insolvencies among power companies.
The European Commission’s proposal includes capping revenues from electricity generators that have gained from higher prices but do not rely on gas. It also included measures to force fossil fuel firms to share windfall profits from energy sales.
“In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers,” von der Leyen said.
National governments would be responsible for recouping the excess revenue and rechannelling it into measures that could include lowering electricity bills, or helping consumers invest in energy saving measures such as home insulation.