Kate Abnett and Foo Yunchee

BRUSSELS, (Reuters) – The European Commission proposes that member states tax profits made by energy companies from recent spikes in gas prices and use the revenues to fund renewable energy projects and energy-saving improvements. Sources familiar with the matter stated Monday.

European gas prices reached record levels last year. Prices have continued to rise since then, with gas prices in Europe soaring again on Monday because of concerns about disruptions due to Russia’s invasion of Ukraine.

The EU executive is expected to publish next week proposals that reduce Europe’s dependence upon imported gas quicker and increase the resilience of energy systems across countries in face of price rises or supply shocks.

Sources familiar with the proposals said that the proposal would stimulate national governments to tax windfall profits made by energy companies from high prices and to invest these proceeds in renewable energy, or curbing energy consumption, like insulation.

The proceeds could be used by countries to help consumers or industries affected by high electricity prices. However, this compensation must not distort EU markets.

While the proposed tax could change, it will not be implemented across Europe. Instead, the proposal would inform governments they could introduce levies at their national levels without violating EU regulations.

Nearly every one of the 27 EU member countries has already taken emergency measures to help households avoid higher energy bills. These are mostly due to rising gas prices.

Last year, Spain tried to tax the profits of energy companies that it felt had benefited from rising gas prices. However, utilities resisted this move.

Brussels believes that the only way to increase Europe’s energy security, and to reduce exposure to volatile prices for fossil fuels is to accelerate its transition to renewable energy, and to renovate buildings so they consume less energy. This will also help the industry to invest in more energy-intensive activities.

These plans are part the EU climate policy policies, which EU countries and European Parliament currently negotiate – and that would be further supplemented next week by the proposal.

Reuters saw an early version of the Commission’s proposal. It would require EU nations to stockpile gas ahead of winter in order to buffer supply shocks and accelerate permitting for new solar and wind farms.