EU energy profit levy may defray cost of budget promises

Having announced its plans to support consumers through the winter, it is clear that, for Ireland, a big part of what happens next will be determined by European policy. EU energy ministers on Friday agreed a levy on fossil fuel producers, a process to ensure a cap on the price paid for fuels other than gas used to produce electricity and a commitment to save energy.

What does this mean for Ireland?

It should mean some extra revenue for the exchequer, first off. This would come from windfall tax on the gas coming from the Corrib field and measures to skim off excess revenues coming from wind energy used to produce electricity.

Neither is straightforward – and where the excess profit rests in the wind energy supply chain is just one issue. The Department of Finance position is that it hopes that the money raised will offset some of the €1.2 billion cost of the business support scheme announced in the budget. Energy Minister Eamon Ryan has said he hopes €1 billion to €2 billion might be raised. But how this pans out very much remains to be seen.

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The trend in the wholesale price of gas will be vital in terms of how much might be raised – and the urgency with which this measure will be pursued.

Meanwhile, just ahead of the EU meeting Germany announced its own outline plan, a €200 billion programme that looks set to provide some gas and electricity to consumers and businesses at a capped price, with the market price applying above this. The extent and timing of this move from the EU’s biggest economy has raised some hackles elsewhere in Europe, which had hoped that Germany would lead a co-ordinated EU response.

The partial cap idea is interesting, but there are no details yet on how exactly this might work – and Germany has opposed a wider cap on EU gas prices, worrying that it could damage supply.

So while an EU strategy is starting to emerge, a lot of the blanks have still to be filled in. Irish officials will start working on the windfall charges, but there is a way to run in this one yet.