Five European Union member states are pressing Brussels to draw up a new EU-wide windfall tax on energy companies, reviving a measure first deployed during the 2022 energy crisis as governments confront another sharp rise in fuel costs.
Germany, Italy, Spain, Portugal and Austria argue that companies benefiting from the latest price surge should help finance temporary relief for consumers and reduce inflationary pressure without placing further strain on public finances.
The initiative comes as the EU faces renewed stress in energy markets following the conflict involving Iran, which has driven up concerns over supply disruption and price volatility. Reuters reported on 4 April that the five countries have written to Climate Commissioner Wopke Hoekstra asking the European Commission to accelerate work on a legal framework for such a levy. The ministers say the measure would not only generate revenue for emergency support but also demonstrate a common EU response to the crisis.
The proposal reflects growing concern in Brussels that the recent surge in energy prices risks spilling over into household budgets, industrial costs and inflation. Reuters reported on 31 March that EU officials were already considering whether to revive crisis-era measures introduced after Russia’s full-scale invasion of Ukraine, including temporary limits on some tariffs and taxation of excess profits in the energy sector. European gas prices were reported to have risen by more than 70 per cent since late February.
This is not the first time the EU has turned to such tools. In 2022, member states agreed emergency measures to reduce energy prices, including a temporary “solidarity contribution” on surplus profits in the crude petroleum, natural gas, coal and refinery sectors. Under that system, the contribution applied to taxable profits in 2022 and or 2023 that were more than 20 per cent above the average annual taxable profits recorded since 2018. The Council said at the time that the measure was designed to capture exceptional gains arising from the energy shock and redistribute part of them to consumers and businesses under pressure.
A later Commission report found that the 2022 framework had established a mandatory temporary solidarity contribution on surplus profits generated in the relevant fiscal years, depending on national choices in implementation. Reuters Breakingviews reported this week that the EU collected about €29 billion from oil and gas firms under the earlier approach, although it noted that results were uneven and that the effectiveness of windfall taxes depends heavily on design, scope and market conditions.
The five-country push therefore opens a familiar but politically sensitive debate. Supporters argue that when geopolitical shocks push prices sharply higher, some companies can record windfall gains unrelated to productive investment or improved efficiency. In that reading, a temporary levy is less about punishment than redistribution: governments use part of those gains to shield households and reduce the wider economic fallout. The Commission’s current energy policy already states that Europe must be prepared to protect affordability during an energy price crisis, and Commissioner Dan Jørgensen’s portfolio explicitly includes bringing down energy prices for households and companies while maintaining a resilient and secure system.
Opposition to a new levy is also emerging. Reuters reported that the German Fuel and Energy Association rejected the claim that energy firms are making unjustified profits and warned against measures that could weaken supply security at a time of worsening market conditions. Critics of windfall taxes have long argued that such measures can be blunt instruments, especially in sectors where firms face volatile global prices, large capital requirements and long investment cycles. They say that poorly designed taxes can deter investment in infrastructure, including projects intended to strengthen Europe’s energy resilience.
There is also the question of scope. The current letter from the five governments does not specify which companies would be targeted or how “excess” profits would be defined. That omission matters. The earlier EU solidarity contribution focused mainly on fossil fuel and refining sectors. A new framework would have to decide whether to mirror that approach, broaden it, or apply different thresholds to reflect current market conditions. It would also have to navigate tax sensitivities among member states, many of which remain wary of handing Brussels greater influence over fiscal instruments.
For the Commission, the issue now sits at the intersection of energy security, inflation control and political cohesion. Brussels has already moved in recent years to tighten gas storage rules and improve crisis preparedness, while seeking to reduce dependence on Russian energy supplies. Yet another price shock has shown that the EU remains exposed to turmoil beyond its borders. Whether the proposed windfall tax gains traction will depend on how far member states can agree on a common design and whether the Commission judges that the present surge justifies another exceptional intervention.
For now, the message from the five capitals is clear: if energy companies are again benefiting from a geopolitical crisis, they believe the burden of adjustment should not fall solely on consumers and national budgets. Brussels must now decide whether to reopen one of the most contested policy tools of the last energy emergency.
