In light of the concerns raised in certain quarters by the proposal —driven by Spain together with Germany, Italy, Austria, and Portugal— to establish a temporary, Europe-wide coordinated levy on the extraordinary profits of energy companies, we would like to share some reflections. Minister Carlos Cuerpo, in a letter addressed to the European Commission on April 3, 2026, asked to explore a solidarity fiscal instrument that obliges companies profiting from the war in the Middle East to contribute to alleviate the burden on consumers and public budgets.
Why Europe is returning to the debate on extraordinary taxes in times of war
Neither monetary policy nor fiscal policy are designed to face a pandemic or times of war. Therefore, as the improbable happens, we have to implement extraordinary policies. For example, during the pandemic we implemented massive ICO loan mechanisms and ERTE schemes to save our companies. No one protested about legal uncertainty then. On the contrary. More debate was generated by the measures related to Putin’s war in 2022, which are the immediate, unexpected precedent for what is now proposed. Those measures were understood more as a way to mitigate inflation and its consequences than as an instrument of real-time solidarity or reciprocity regarding pandemic subsidies. The energy shock stemming from the war between the US–Israel axis and Iran arrives while we have not yet settled the accounts of the previous one.
“Neither monetary policy nor fiscal policy are designed to address a pandemic or times of war”
It is true that urgency makes it easier to make economic policy mistakes. Moreover, as humans, extraordinary taxes make us feel less secure (in legal terms) than extraordinary subsidies. The current situation may be more complicated than the COVID-19 crisis or even than the 2022 energy shock. That is why the Government—and, in this case, the European Commission—must design and explain very clearly to whom and how they are taxed, and the scope of such levies. To begin with, it is desirable that such levies be designed to decay as soon as the urgency ends: the temporary nature of the measures. It is also desirable that the levies agreed are understood as part of the European common taxation. Regulation (EU) 2022/1854, adopted after Russia’s invasion of Ukraine, can serve as a legal reference, but also as a warning: its uneven implementation among Member States generated investment uncertainty that is best not repeated.
Electric utilities, oil companies, and banking: whom to tax and with what limits
It seems desirable, certainly, to tax the so-called windfall profits of electric utilities and oil companies. In the case of electricity producers, these arise because the CO2 emission rights raise the price of electricity. Since clean energies do not pollute, the companies that produce them enjoy those “windfall” gains through an inflated electricity price driven by regulatory reasons. In other words, the design of the emissions market, together with the marginalist price mechanism, makes the prices of emission rights a tax on fossil fuels that, implicitly, serves to subsidize clean energies. The question is whether the volume of that subsidy is appropriate. If it is too high, instead of incentivizing companies to innovate, we end up rewarding complacency.
The current marginalist design of the market also means that gas sets the price, although in Spain the situation has improved considerably: the rapid deployment of renewables has managed to have gas set the electricity price in barely 15% of hours in 2026, compared to 75% in 2019. Despite this progress, the rise in oil prices in the context of the Iran war does not reflect structural scarcity but geopolitics and financial risk management. Therefore, it seems reasonable also to impose a surcharge on extraordinary profits in the hydrocarbons sector. This requires, even more than in the case of electric utilities, a coordinated European-level intervention —precisely what the five Ministers propose— with a solid legal basis that avoids challenges. Let us trust that experts design the intervention that best aligns incentives. The right design is the key. We always lean toward a temporary surcharge on the corporate tax over other alternatives that could have undesirable side effects.
“The worrying thing is that those profits appear in sectors where competition is not an option: energy companies or banking”
Extraordinary profits in the energy sector may have extended the notion that the crisis induces extraordinary margins in many other sectors. Some studies point to high margins in distribution, food, and technology, associated with bottlenecks in supply. In those cases, the CNMC should act to defend competition. The concern is that those profits appear in sectors where competition is not an option: energy companies or banking. It makes no sense that, due to the ups and downs of monetary policy and the war in Iran, they should once again turn into a torrent of millions for the banking sector at the expense of mortgage borrowers. Likewise, the current scenario has favored the market power of hydrocarbons companies. It cannot be defended that the market alone determines the evolution of key prices in a war environment, while at the same time denying governments, in a coordinated European manner and with broad agreement from the major companies, propose extraordinary tax measures.
We know it is controversial to suggest taxing profits, turnover, or assets. If there is one thing financial innovation favors, it is the possibility of disguising income. If there is one thing modern data processing technology enables, it is to render observable dimensions that until recently lent themselves to concealment. In many cases, wealth or turnover can be a proxy for unobserved streams subject to taxation. Stirring up a scandal over this matter and talking about confiscation seems like a thing from another era, even more so within the framework we have just described.
The important thing is that companies bear their fair share in sustaining public goods and that they can convey to citizens that they do so. The utmost cooperation between the public and private sectors, even more so in strategic sectors, is indispensable.
