Pearse Doherty (Donegal, Sinn Fein)
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93. To ask the Minister for Finance further to Parliamentary Question No. 177 of 14 September 2022, his views on implementing windfall taxes on energy companies that are generating unjustifiable revenues as a result of the energy crisis; the position that he has articulated on this proposal at Eurogroup level since October 2021; the work that has been undertaken in his Department relating to this measure; and if he will make a statement on the matter. [46505/22]

Pearse Doherty (Donegal, Sinn Fein)
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The energy crisis has plunged households into real hardship and uncertainty. Many people are worried about how they will make ends meet this winter. The energy crisis has been with us for some time now, with spikes in prices in bills last year. What is the Minister's current position on the levying of windfall taxes on energy companies on the back of this crisis? What position has he adopted within the Government as well as in the Eurogroup and ECOFIN since October 2021? Has that position changed during that time?

Paschal Donohoe (Dublin Central, Fine Gael)
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The war in Ukraine and Russia’s reduction of gas supplies to Europe have led to volatility in energy markets and an increase in wholesale gas prices. This is added to existing supply constraints in electricity markets across Europe, which in turn have led to an unprecedented increase in retail electricity and gas prices for consumers, households and businesses in Ireland and across Europe. I am very cognisant of the difficulties this is causing for so many. It is clear the increase in energy prices is leading to windfall gains for some energy companies across Europe, particularly those involved in the production of fossil fuels and those producing energy using technologies that are not dependent on gas. My officials have been working with the Department of the Environment, Climate and Communications to attempt to quantify such gains and to explore the potential of collecting a portion of these gains to provide support to energy consumers during these very difficult times.

Work in this regard is now focusing on a proposed European Commission regulation, which is under rapid negotiation. Gains to electricity producers are driven by the market structure, which determines the marginal price paid for each unit of electricity sold. For this reason, the EU regulation proposes to include an inframarginal price cap in the electricity market, designed to limit windfall revenues for producers that are not experiencing input cost inflation. The proposal will be negotiated throughout the remainder of this month with a view to being approved at a meeting of the Council of energy ministers on 30 September. I fully support the objectives of this proposal.

The Deputy referenced discussions at the Eurogroup. The Eurogroup discussed this matter at its most recent meeting. In the statement I issued after that, I recognised that super levels of profitability should not be experienced by some while so many are suffering the economic consequences of a war.

Pearse Doherty (Donegal, Sinn Fein)
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Energy companies and generators have been enjoying massive and unjustifiable profits as a result of the spike in gas prices, which has been brought on by the illegal invasion of Ukraine, or at least has contributed significantly towards it. This is also the result of a broken wholesale energy market that is inflating electricity prices and household bills. By paying electricity generators the cost of the final generator needed to balance demand, typically gas in this instance, lower cost electricity generators are enjoying windfall revenues. It is increasing the cost for suppliers and prices for households and businesses. My colleagues have been raising this with the Government since November 2021. The Minister for the Environment, Climate and Communications issued a joint statement opposing any changes to the operation of the wholesale electricity market at that time. The Minister for Finance himself has voiced on numerous occasions opposition to a tax being levied on electricity generators enjoying windfall profits over the past several months. Has the Minister changed his position on a windfall tax? I am referring to the position he outlined to the media and the Committee on Budgetary Oversight.

Paschal Donohoe (Dublin Central, Fine Gael)
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What I have done on many occasions is outline the issues an additional taxation measure on the energy sector in Ireland would result in. I have made clear that the additional revenue such a measure could gain would be needed but I have also outlined a number of other factors we have to balance that against, such as the impact it would have on jobs and future investment in Ireland and the impact it could have on the supply and functioning of our energy markets, which matter to the economic growth of the country. The European Union has now brought forward a proposal that would operate either EU-wide or in a number of countries within the EU and is aimed at balancing all those different issues. It is a complex issue. It does not lend itself to an easy or simple solution but if an EU-wide measure that can work is available, I believe Ireland should be part of it.

Pearse Doherty (Donegal, Sinn Fein)
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To clarify, does the Minister now believe in the idea of windfall taxes on electricity generators, particularly those in the renewable sectors? On 4 May last, he told the Committee on Budgetary Oversight that "another option is higher taxes on the suppliers of renewable energy", stating also that "Renewable energy is the way out of this, over time, and I would argue that taxing those who are at the heart of trying to provide new sources of energy supply is the wrong direction to go." Is the Minister now saying that is the right direction to go or is he saying it is still the wrong direction? I am confused. He was opposed to this measure. He told Newstalk that a windfall tax on these companies would undermine investment in the sector. President von der Leyen has made very clear that because these companies are generating profits that never seemed imaginable, Europe will now bring forward a windfall tax. Is this something the Minister now supports? Can he explain why he has changed his position? When Bruno Le Maire brought forward a proposal to the Eurogroup and ECOFIN in October 2021 to decouple gas and electricity prices on the wholesale market, what position did the Minister personally adopt at that meeting?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Eurogroup does not deal with proposals relating to the functioning of the energy market. That sits with the Council of Ministers that deals with energy, on which we are represented by the Minister for the Environment, Climate and Communications. Our perspective on those kinds of proposals is that we wanted to ensure they did not create any unknown or new difficulties on top of what we already have. The Deputy made reference to what I said on the issue on 4 May. What has changed since then is that the prices now being experienced in wholesale energy markets have exponentially increased. In response to that, the EU has brought forward a measure that aims to reduce the risks small open economies like Ireland would face. As I have said on a number of occasions, if that EU-wide measure works for us and if it balances off all the competing issues a new taxation measure would have on a sector that matters to the economic security of our country, Ireland will be part of it. That is the stance the Government is taking. We hope that in a few weeks negotiations on this important matter will have concluded.