Gas and electricity prices reached record levels in 2021 and again hit all-time highs in 2022, in particular following the Russian invasion of Ukraine. The skyrocketing electricity prices across Europe are intrinsically linked to the high price of gas, which increases the price of electricity due to the role of gas-fired power plants in covering demand and setting price. This dramatic increase in electricity prices is putting pressure on EU households, small and medium enterprises and industry at large.

Besides proposals on reducing demand and consumption of electricity, the proposed Council Regulation of September 2022 contains a temporary revenue cap on ‘inframarginal' electricity producers (such as renewables, nuclear and lignite) and a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal and refinery sectors which are not covered by the inframarginal revenue cap.

The study will analyse, on the basis of desk research, the effectiveness and distributional consequences of excess profit taxes or windfall taxes in light of the Commission's recommendation to Member States.