EU Energy Crisis Response Needs a Windfall Tax on Oil Companies to Fund Electrification of Transport

Transport & Environment (T&E)

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T&E reaction to the European Commission announcement of emergency measures on the energy crisis.

The emergency actions presented by the European Commission today are only half measures to respond to the oil crisis and reduce Europe’s dependency on fossil fuel imports, T&E has said. The EU missed an opportunity to tax the excessive and unacceptable profits being made by oil companies since the start of the crisis and to present a comprehensive plan to accelerate the roll-out of electric vehicles (EVs).

New announcements include stronger EU coordination to guarantee fuel supplies and small measures to shield consumers and industries from rising oil prices. But the EU has not proposed to tax the windfall profits of oil companies — contrary to its response in 2022 with the Energy Solidarity Mechanism — to fund measures to reduce energy consumption and support those in fuel poverty. It will merely provide guidance to member states which wish to tax windfall profits.

Oil companies are set to make a €37 billion windfall from European drivers off the back of the latest conflict in the Middle East, T&E’s oil profits tracker finds. T&E is calling for an EV acceleration plan, including targeted incentives to switch to EVs and e-trucks. EU-wide and national taxes on major oil businesses could provide substantial financing for this and other measures proposed today.

The plan fails to support EVs in policy areas that the EU does have direct power over, T&E said. The NGO called on EU lawmakers to accelerate agreement on its Automotive Package and maintain the current 2030 CO2 targets for carmakers. This would ensure the supply of more affordable EVs and reduce Europeans’ exposure to repeated oil crises. Carmakers are demanding that the targets be weakened, which could result in 40 million fewer EVs on European roads in 2035 than under the current law, analysis by T&E on the car industry lobby ACEA’s leaked position paper has shown.

The strategy unveiled today acknowledges that building a resilient energy network is key to balancing supply and demand, but significant new investment in grids is needed, T&E said.

Antony Froggatt, Senior Director for Aviation, Shipping and Energy at T&E, said: “Instead of the robust and comprehensive response that Europeans need right now, the Commission has proposed half measures. These go in the right direction but fail to create the right EU instruments both on the revenue and financing sides. As oil companies make tens of billions in war profits, windfall taxes that relieve the financial pain for European households are critical. It is shocking that the Commission has missed the opportunity to drive affordable electric vehicle uptake for households and SMEs.”

The financial measures outlined in AccelerateEU to accelerate the transition to green fuels for aviation and shipping show a step in the right direction, T&E says, as they underline that SAFs and SMFs are key to reducing the sector’s dependency on fossil fuels. Recent T&E analysis shows that the current oil crisis has added €90 in costs to long-haul flights, compared to a mere €3 from the SAF mandate. For the shipping industry, the crisis is costing €340 million a day. Electrification of the shipping fleet, efficiency measures and plug in at berth offer immediate cost savings. The EU should not succumb to industry pressure asking to weaken the fuel mandates or the ETS, as these laws are essential blueprints for achieving energy independence, T&E says.

Article from T&E.