Energy windfall taxes require nuance and realism

2026-04-02 04:51:14

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MUMBAI, March 31 (Reuters Breakingviews) - Each energy shock bears lessons for the next one. To protect consumers from surging gas bills, Australia and Germany are considering slapping windfall taxes on any Iran war-fuelled super-profits enjoyed by oil and natural gas drillers. TotalEnergies (TTEF.PA), opens new tab, for instance, has already made as much as $1 billion trading Middle Eastern oil, the ‌Financial Times reported on Monday. But previous iterations of the levy often undershot estimates. That makes the case for a more nuanced, realistic approach to the latest crisis.

Canberra and Berlin are considering whether to reprise the fiscal tool that was tried most recently in 2022 after Russia’s invasion of Ukraine sent energy prices soaring worldwide. The European Union, the UK and India were among jurisdictions that slapped levies on natural gas producers’ supernormal profits.

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The levies can be hit-and-miss. EU member states had success collecting roughly 29 billion euros ($33.33 billion) in “solidarity contributions” from oil and gas ⁠companies, exceeding a 25 billion euro target.

But a scheme to tax utilities that charged more than 180 euros per megawatt hour looked set to miss, opens new tab an initial 50 billion euro estimate. The UK versions of taxes on excess receipts and profits, which will remain in force until 2028 and 2030, respectively, have so far secured less than a quarter, opens new tab of the government’s forecasts. That’s because energy prices dropped sharply after an initial spike in 2022.

Which type of tax works for a country is tied to its position in the energy value chain. India, a crude-oil and natural gas-deficient nation grappling with a supply shortage, has little incentive to tax oil producers or refiners whose earnings get redeployed in the local market. To maximise domestic availability, New Delhi last week slapped fresh levies on exports of diesel and aviation turbine fuel.

It may make sense for Australia, one of the world’s top-three natural gas producers, to follow ‌suit. Another ⁠option is to target a tax at output from its wells, as production does not fluctuate as much as prices do. So far, though, the only measure Prime Minister Anthony Albanese’s government has implemented to ease the hit to consumers is halving the fuel excise tax drivers pay at the pump.

Crucial, too, is the use of proceeds. New Delhi pumped its takings of 440 billion rupees ($4.64 billion) between 2022 and 2024 into expanding households’ access to liquefied petroleum gas. Those gains are now being reversed ⁠as a shortage of LPG cylinders forces Indian kitchens to return to dirtier coal and firewood. Directing some of the largesse into building more renewable power and oil and gas stockpiles would provide more lasting energy security – and better insure economies against the next fossil fuel shock.

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India on March 27 imposed export ⁠duties of 21.5 rupees (23 cents) per litre on diesel and 29.5 rupees (31 cents) on aviation turbine fuel. “This will ensure adequate availability of these products for domestic consumption,” Finance Minister Nirmala Sitharaman said in a post on social media platform X.
Australian Prime Minister Anthony Albanese has asked the country’s Treasury to ⁠model “new levy options” as a means of taxing windfall gas and thermal coal company profits, the Australian Broadcasting Corporation reported on March 19, citing a document prepared by the Department of Prime Minister and Cabinet. The document also asked Treasury to work up options for further reform of the Petroleum Resources Rent Tax, the report added.

Editing by Antony Currie; Production by Ujjaini Dutta

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Shritama Bose

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Shritama Bose, India columnist, joined Breakingviews in November 2022. She covers the financial sector and related topics from Mumbai. She was earlier a reporter at Financial Express, a top business daily newspaper, tracking the Reserve Bank of India, lenders and fintech companies. She has a bachelor’s degree in English Literature and a postgraduate diploma in journalism.

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