The Use of Windfall Taxes on the Energy Sector to Support the Green Transition in the EU

On 6 October 2022, Council Regulation (EU)2022/1854 on an emergency intervention to address high energy prices was adopted. The regulation introduced two fiscal measures: A “temporary solidarity contribution” imposed on the oil, gas, coal, and refinery sector to recover surplus profits generated during the fossil fuel crisis and a “cap on market revenues” for electricity producers. The regulation also outlines the use of these revenues in the Member States of the European Union (EU). The objective of this chapter is to demonstrate that these EU policy measures serve as fiscal instruments for accelerating the green transition. By imposing tax measures on windfall profits resulting from the energy crisis and requiring the Member States to use the proceeds for the purposes listed in the regulation, the EU created a redistribution tool to support its transition to renewable resources. The chapter examines in detail whether the solidarity contribution and the cap on market revenues as defined in the regulation can effectively contribute to sustainable financing as part of the EU’s energy and climate policy measures.