New legislation has been unveiled which aims to introduce a temporary windfall tax on profits made in 2022 and 2023 by the fossil fuel production and refining sector as a result of the war in Ukraine.

The energy windfall gains in the energy sector (temporary solidarity contribution) bill 2023 is expected to generate between €200m and €450m in revenue through a temporary solidarity contribution.

The Government intends to use these funds to provide financial assistance to households and businesses grappling with the impact of high energy prices.

ADVERTISEMENT

A portion of the funds may also be allocated to support investments in renewable energy.

'Significant proceeds'

Minister for Environment, Climate and Communications Eamon Ryan said: "This bill is welcomed, as it will collect significant proceeds that can be used to ease the impact of high energy prices on vulnerable energy consumers."

The temporary solidarity contribution will:

  • Apply to fossil fuel production and refining.
  • Apply for 2022 and 2023.
  • Be based on 75% of taxable profits which are more that 20% above the baseline of taxable profits for the period 2018-2021.
  • Not include losses from previous years when being calculated.
  • Be administered by the revenue commissioners.

    • Cap

    Minister Ryan also revealed plans for the separate energy windfall gains in the energy sector (cap on market revenues) bill 2023, which will be presented to cabinet in July.

    The cap on market revenues will:

  • Be introduced for non-gas generators in the wholesale electricity market.
  • Apply to all market revenues of relevant generators.
  • Apply only to facilities with a capacity of 1mw or more.
  • Include a cap of €120 per MWh for wind and solar.
  • Not apply to wind or solar energy projects which make difference payments to the public service obligation under the Renewable Electricity Support Scheme, as these revenues are already capped.
  • Include a cap of at least €180 per MWh for oil-fired and coal-fired generation that is high enough to the collect windfall gains while ensuring this generation continues to operate and provide security of supply.
  • Include a cap of €180 per MWh for all other technologies.
  • Be administered by the commission for regulation of utilities.

    • The decision to divide the proposed windfall gains bill into two separate bills was made to accelerate the collection of the temporary solidarity contribution from the fossil fuel production and refining sector before the summer break, according to the statement from the Department of Environment, Climate and Communications.