National Bank in favour of skimming off excess profits of electricity producers

The National Bank is in favour of a permanent system for skimming off the excess profits of electricity producers. ​ This is according to an analysis by the central bank at the request of Federal Energy Minister Tinne Van der Straeten after several energy producers went home with usurious profits during the energy crisis. ​

Since the summer of 2021, prices for electricity and natural gas have risen to unprecedented levels. However, for some electricity producers, especially those that produce nuclear or wind power, variable costs remain low, allowing them to make higher profits. This is because the price of electricity is determined on the basis of the most expensive supplier, the one who has to import oil or natural gas to produce energy. Therefore, for electricity generated from renewable sources or nuclear fission, the price rises while the cost remains the same. ​ It is this extra profit, which goes beyond the normal return, that the federal government wants to skim off. The National Bank is not putting a spoke in the wheel: in an analysis that Van der Straeten received at the end of last week, the central bank says that an over-profit tax in the energy sector "can make sense".

However, the National Bank argues for a permanent system, which leads to certainty in the sector. A one-off higher levy could discourage future investments for fear of arbitrariness. In addition, the system should be "symmetrical", whereby results in years with lower profits can be deducted from the surplus profits.

Furthermore, the institution stresses that the tax should be "intelligent". It points out that identifying the excess profit is not easy in practice, because it is often redistributed among the various market players, who try to hedge against cost and price fluctuations in various ways. In addition, support mechanisms for e.g. green power plants or gas power plants for security of supply purposes should be designed in such a way that they decrease and even become negative as the return increases.

Introducing a temporary tax on excess profits sooner, as several European countries have already done, "is understandable from a practical point of view", says the National Bank, because working out a permanent system takes time. Should our country also opt for this, then the temporary measures must be "as close as possible to the intelligence of a permanent system" and the realised surplus profits must be estimated as accurately as possible, it is said. "The greater the uncertainty, the more appropriate it is to set the threshold for excess returns at a sufficiently high level or to limit the rate of excess returns. In addition, the central bank is urging "short-term prudence" because of the losses incurred by producers in recent years.

According to Van der Straeten, the note from the National Bank paves the way to effectively skimming off excess profits. "I am now finalising a concrete proposal for a crisis contribution for the entire energy sector that I will submit to the government," says the energy minister. "No one should enrich themselves from the energy crisis is what I said at the outset of the global energy crisis, and that is what I am working on systematically and substantiated."


© BELGA PHOTO/ ERIC LALMAND - National Bank governor Pierre Wunsch pictured during a press conference of the Belgium national bank.

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