European Union ‘Social Market Economy’ Might Redistribute Fossil Fuel Profits

European Union ‘Social Market Economy’ Might Redistribute Fossil Fuel Profits

European Commission President Ursula von der Leyen said on Wednesday that the European Union might redistribute profits from fossil fuel companies and impose energy consumption limits.

The bloc is currently weighing various measures to help member states cope with a freeze in Russian energy exports — including natural gas shipments through the Nord Stream 1 pipeline, which Russia paused in reaction to Western support of Ukraine. In her State of the Union address, von der Leyen asserted that Russia is largely responsible for the energy crisis.

“Russia keeps on actively manipulating our energy market,” von der Leyen said, noting that natural gas prices have recently increased more than tenfold. “But Europeans are also coping courageously with this.”

Multiple European countries are imposing regulations for thermostat and appliance usage. However, von der Leyen announced that she would propose standards for European Union member states to reduce “overall electricity consumption,” funded by redistributing profits from energy companies.

“We are proposing a cap on the revenues of companies that produce electricity at a low cost. These companies are making revenues they never accounted for, they never even dreamt of,” von der Leyen said. “In our social market economy, profits are good. But in these times it is wrong to receive extraordinary record profits benefitting from war and on the back of consumers. In these times, profits must be shared and channeled to those who need it the most.”

Russian shipments accounted for 40% of the European natural gas supply last year — a rate that has since dropped to 9%. However, Germany — the continent’s largest economy — has seen dependence decrease from 55% to 35%.

Von der Leyen argued that fossil fuel producers have a “special duty” to aid with the crisis. “Major oil, gas and coal companies are also making huge profits. So they have to pay a fair share — they have to give a crisis contribution,” she added. “These are all emergency and temporary measures we are working on, including our discussions on price caps.”

The European Union, in accordance with the European Green Deal and the Paris Climate Agreement, abides by the official goal of becoming “a climate-neutral society” by 2050.

Though von der Leyen acknowledged last week that low hydropower generation caused by droughts is partially responsible for high energy prices in Europe, she said that “the climate crisis” is the ultimate impetus for the weather conditions and called for the elimination of all fossil fuel dependence.

“Half a century ago, in the 1970s, the world faced another fossil fuel crisis. Some of us remember the car-free weekends to save energy. Yet we kept driving on the same road. We did not get rid of our dependency on oil. And worse, fossil fuels were even massively subsidized,” she continued. “This was wrong, not just for the climate, but also for our public finances, and our independence. And we are still paying for this today. Only a few visionaries understood that the real problem was fossil fuels themselves, not just their price.”

In a departure from other European leaders, however, incoming British Prime Minister Liz Truss proposed legislation last week to open the North Sea for oil and gas drilling, as well as to facilitate the construction of more nuclear power plants. Other countries, such as Germany and Switzerland, have been slowly shuttering their remaining nuclear facilities in reaction to the 2011 meltdown in Fukushima, Japan.

“Energy policy over the past decades has not focused enough on securing supply,” Truss told the House of Commons. “All of this has left us vulnerable to volatile global markets and malign actors in an increasingly geopolitical world.”

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