Spain seeks support in Europe to tax the profits of oil and gas companies

BrusselsThe Spanish government wants to tax the profits of oil and gas companies in the European Union. It considers that in the context of the energy crisis, in which prices have soared, these companies are "benefiting too much." For this reason, together with four other countries, they are bringing their offensive to impose a levy on them to this Friday's Ecofin meeting. As sources from the Spanish government have confirmed to ARA, this issue will be addressed at the informal meeting of Finance ministers, which will take place in Dublin.

Spain and like-minded countries will present their vision to push the proposal forward, with the hope of "defining the next steps" to approve the measure, executive sources explain. The Spanish Minister of Economy and Finance, Carlos Cuerpo, has assured from Dublin that he will push for this measure so that there is a "fair sharing of the economic burden" resulting from the inflation currently borne by families and businesses.

The profits they want to tax are the so-called windfall profits (windfallprofits, in English). That is to say, the extraordinary and unexpected gains obtained by energy companies derived from external events (such as wars or the regulatory design of the market itself) when the price of fossil fuels soars.

The Economy ministers of Portugal, Germany, Italy, Austria, and Spain already showed themselves to be in favor of imposing this levy in April. At that time, they sent a letter to the European Commissioner for Climate, Wopke Hoekstra, requesting a temporary solidarity instrument so that energy companies contribute with the extraordinary profits derived from the war and "alleviate the burden" on consumers and taxpayers.

In the letter, they recalled that a similar tax had been set in 2022, when the Russian invasion of Ukraine caused fuel prices to soar. At that time, the European Union introduced a "temporary solidarity contribution" as an emergency mechanism. The tax was 33% on the extraordinary profits of community oil and gas companies, that is, those that exceeded the average profits of the period between 2018 and 2021 by more than 20%. Brussels collected about 28 billion euros, which were dedicated to lowering the electricity and gas bills for individuals, as well as to subsidizing the price of gasoline.

Since the start of the war in the Middle East, the price of oil (the reference in Europe being the Brent barrel) has increased between 14% and 15%, and year-on-year inflation has rebounded to 3.3%. Given the context of inflation, which according to the European Central Bank will be more sustained and higher than expected, the Spanish executive trusts that its vision will prevail among the rest of the states.

Climate resilience fund

How should the funds raised from this levy be invested? The Spanish government's proposal is for them to be allocated to a climate resilience fund. The Spanish Minister for Ecological Transition, Sara Aagesen, requested in a letter to the European Commission at the beginning of September that it establish a climate adaptation fund to "strengthen the collective response to emergencies" and "anticipate climate risks." The text emphasized that many member states are highly exposed to the consequences of the climate crisis, "as recent events have clearly demonstrated."

The Moncloa initiative provides for other alternative funding routes for the creation of the fund. On one hand, additional taxes on polluting or luxury activities, such as the use of private jet flights. And on the other, the issuance of community debt, which would allow for the creation of a European insurance system to cover major natural disasters. A mechanism that was already announced by the President of the European Commission, Ursula von der Leyen, during the State of the Union address in Strasbourg.

This is not the first attempt by the Sánchez executive to establish a similar tax. In 2022, it already applied an extraordinary tax on large energy companies that was broader than Brussels': it applied a 1.2% rate on the turnover of companies with an annual revenue of over 1 billion euros. When the coalition government tried to extend it and make it permanent at the end of 2024, the measure stalled in Congress due to a lack of support from partners such as Junts and the PNV. The levy definitively lapsed at the beginning of 2025.