Dáil Éireann Debate, Thursday - 15 June 2023
76. Deputy Darren O'Rourke asked the Minister for the Environment, Climate and Communications what, if any, assessments have been made by the Government regarding the best way to implement a windfall tax here in order to capture excess revenues in the energy sector in the year 2022; and if he will make a statement on the matter. [28914/23]
View answerWhat, if any, assessments have been made by the Government regarding the best way to implement a windfall tax to capture excess revenues in the energy sector in the year 2022? Will the Minister make a statement on that matter?
Council Regulation (EU) 2022/1854 seeks to address windfall gains in the energy sector by collecting excess revenues from those companies that have unexpectedly benefited from high prices and redistributing those revenues to alleviate pressures on affected consumers. As per Article 22(2)(c) of the regulation, a cap on market revenues shall apply from 1 December 2022 to 30 June 2023. In November of last year, the Government decided to approve the implementation of the Council regulation. In March 2023, the Government approved the general scheme of the Energy (Windfall Gains in the Energy Sector) Bill 2023, which will implement the temporary solidarity contribution and the cap on market revenues in line with the regulation.
I received the agreement of the Government this week to advance and present to the Dáil immediate legislation to deal with the contribution from the fossil fuel companies, which we hope will pass all stages in the Houses before the summer recess, and to publish, in a separate Bill, legislation to deliver the market cap which, as I have said, applies from 1 December 2022 to 30 June this year, in this term and before the recess. In that way, we will be able to collect all of the revenues that are due, subject to the Houses' agreement. The legislation for both the solidarity contribution and the market cap will be in line with European law and with the social solidarity that people expect the energy sector to provide in redistributing some of the surplus supernormal profits that have arisen because of the war.
I will specifically ask about two things. With regard to the temporary solidarity contribution and the cap on market revenues, is the Government now committing to using all of the money collected from the windfall tax to protect people who are at risk of fuel and energy poverty? It has been presented in the media as if that commitment is implicit. My understanding is that there is no explicit commitment in respect of both the cap on market revenues and the temporary solidarity contribution. Is the Government making that commitment today?
What are the technical issues that have arisen that have given rise to the splitting of the legislation? With what elements of the cap on market revenues has an issue arisen? What were those technical issues?
In line with the European regulation, it is the Government's intention to use the revenues to support Irish consumers in what is still an environment of very high energy prices. This is a difficult time for many households and businesses. Tara Mines, which we were talking about earlier on, is a perfect example of how challenging things are. The legislation is designed in such a way as to provide further help to Irish households and businesses, along with the other measures we have introduced.
On the technical aspects of the market cap legislation, these reflect the very complex nature of the market itself. It is not just about wind farms and sales of power directed to the household. There are also complex market arrangements. Suppliers might be purchasing power from a wind farm. In such a case, determining where the supernormal profit accrues in the end requires detailed accounting analysis. The very nature of this legislation, in its interaction with tax consolidation law and company law, means that we have to get it right. That is why we felt it better to deliver two separate pieces of legislation, one to be enacted this term and one to be published this term, in order to best set out that technical work.
I specifically asked about 2022 revenues. The Minister will know about this point because I have raised it with him before. The cap on market revenues, which is the important piece in the Irish context given our energy landscape, only applies from 1 December 2022. The Minister will know that other countries have taken specific measures that go beyond the scope of the EU regulation. I give the examples of France, Belgium and Austria. The Minister will also know that the height of the profits and the height of the costs of gas on the international markets occurred between April and August and that the EU regulation does not capture that period. Is the Minister or the Government going to include a proposal in the finance Bill to tackle those supernormal and excess profits in the way that France, Belgium and Austria have done? I presume other countries will follow suit.
We are not going to go outside the EU regulation. We are always best legally and in every which way to work in tandem with EU regulations. On the flexibility allowed under those regulations, can the Deputy show me a country that has put a higher rate on the market cap mechanism?
In France, it is €100.
No. Our rate is significantly higher. It is based on very good analysis. Our wind resource tends to be stronger than that of any other jurisdiction.
It is €100 per megawatt hour.
We have gone further than any other government in looking to derive revenues from this. However, I have to say one thing: we should not have any false expectations as to the scale of the revenues involved or their impact on the overall area of energy policy.
It is the principle.
When this was originally established by decisions in Europe and by our own Government, gas market prices were at a level at which we might have expected much larger revenues. As the Deputy said, since then and in the first six months of this year, the price of gas on the wholesale market has fallen dramatically. That will see a much lower level of revenue from what was always designed as a mechanism to tap profits deriving from higher gas prices. When those prices fall, by definition, the revenue we might expect also falls.
The proposal specifically misses the period at which revenues were at their highest.
We are working under the European regulation.
