Europe is debating an idea that seemed to belong to the energy crisis of 2022: a special tax on the extraordinary profits of oil and refining companies. The proposal has returned to the political agenda as energy prices have risen sharply following the disruption of oil supplies linked to the conflict in the Middle East. Italy, Germany, Spain, Portugal, Poland and Austria have asked the EU to discuss a new mechanism for taxing windfall profits at the next meeting of finance ministers in September.
The six governments want the European Commission to examine not only profits generated inside individual countries but also profits earned abroad by multinational oil companies. The debate is not starting from zero. The European Union has already introduced such a tax once.
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The 2022 experiment
In October 2022, at the height of the energy crisis following Russia’s invasion of Ukraine, the EU formally adopted a temporary solidarity contribution on the fossil-fuel sector. The mechanism applied to companies active in crude oil, natural gas, coal and petroleum refining. It targeted profits considered to be above normal levels rather than taxing all corporate earnings.
The calculation was based on taxable profits exceeding by more than 20% the average profits recorded during the reference period beginning in 2018. The additional contribution had a minimum rate of 33% and was applied on top of ordinary national corporate taxation. Member States could instead introduce an equivalent national measure, provided it generated comparable revenue.
The principle was straightforward: companies benefiting from exceptional market conditions would contribute part of those additional profits to help consumers and businesses cope with exceptionally high energy costs.
The European Commission estimated in November 2023 that the measures reported by Member States were expected to generate approximately euro 17.5 billion. That was not yet the final figure, because countries could apply the mechanism to either 2022 or 2023, or to both years.
The eventual total was considerably higher. According to the European Commission’s subsequent assessment, the 2022-23 mechanism generated more than euro 26 billion across the EU. The figure has also been confirmed by senior Commission officials discussing the possibility of introducing a new levy in 2026.
That number is the key reason why the old experiment has suddenly become relevant again.
Euro 26 billion: a useful benchmark for 2026
The euro 26 billion collected in 2022 and 2023 provides the clearest available benchmark for estimating what a new European windfall tax could potentially raise. It would, however, be misleading to simply assume that euro 26 billion could be collected again in 2026.
The calculation depends on several variables: the definition of excess profits, the reference years chosen, the companies covered, the tax rate, the geographical scope and the profits actually recorded by the industry. The energy market is also fundamentally different from that of 2022.
The previous mechanism was introduced when European gas and energy prices had reached unprecedented levels. The new proposal is being discussed primarily in the context of oil prices, refining margins and the disruption of international oil supplies.
There is therefore no guarantee that the same tax base would produce the same amount of revenue. Nevertheless, the previous experience demonstrates something important: a European-wide mechanism can raise tens of billions of euros without imposing a new general tax on households or ordinary businesses.
Why the new proposal is different
The six governments currently pushing for discussions want to learn from the 2022 experience but potentially go further. One of the most important issues is the international structure of the oil industry. Companies such as Shell, BP, TotalEnergies, Eni and other multinational groups operate across numerous jurisdictions.
A national tax can normally reach profits falling within its domestic tax base. It is considerably more complicated to capture extraordinary profits generated elsewhere by the same multinational group.
That is why the six governments have specifically asked the EU to investigate how profits earned abroad could be addressed by a new framework. This could become one of the most difficult technical issues in the entire proposal.
Portugal has already moved first
The European debate is also being accompanied by national initiatives. Portugal approved in July a new 33% windfall tax on extraordinary profits made by oil and refining companies in 2026. The threshold is based on profits exceeding by more than 20% the average recorded in 2024 and 2025.
The Portuguese government intends to use the proceeds to support households and sectors affected by higher fuel costs and to finance the country’s energy transition. The mechanism explicitly draws on the EU’s 2022 model.
This is significant because it demonstrates that a new European measure would not necessarily be starting from a blank page. Governments already have a recent regulatory model that can be adapted to the current market.
Would all the money go towards cheaper fuel?
Not necessarily. This distinction is crucial.
The 2022 EU mechanism was designed to use revenues to support households and businesses and mitigate the impact of high energy prices. It did not establish a direct mechanism whereby every euro collected from oil companies automatically reduced the price of petrol or diesel at filling stations.
A future European tax could therefore finance several different measures: fuel-price reductions, targeted subsidies, tax cuts, support for vulnerable households, assistance to energy-intensive companies or investments in the energy transition.
Consequently, even a tax raising €20 billion, €30 billion or more would not automatically translate into a corresponding reduction in the retail price of fuel. That question requires a separate calculation involving the composition of petrol and diesel prices, crude oil costs, refining margins, distribution costs, VAT and excise duties.
How much could Europe realistically recover?
The most reliable starting point is the previous EU experience. More than euro 26 billion was ultimately raised from the 2022-23 solidarity contribution. The initial Commission estimate was €17.5 billion, but the final amount increased as Member States reported additional revenues.
A new mechanism could therefore plausibly generate billions rather than millions of euros. But assigning a precise figure to 2026 would currently be speculative. The six governments themselves are asking for an assessment of the available revenue precisely because the amount depends on how the tax is designed.
There is another relevant consideration. The European Commission estimates that Member States have already introduced euro 14.5 billion of budgetary measures in 2026 to mitigate the social and economic effects of higher energy prices. If those measures were extended through the end of the year, their estimated fiscal cost would rise to €38.6 billion.
A windfall tax could therefore be presented not simply as a new source of revenue, but as a possible way of financing part of the public cost generated by an energy shock.
The real question is not whether the tax can raise money
The 2022 experience provides a fairly clear answer: yes, an EU windfall tax on the fossil-fuel sector can raise substantial amounts of money. The more complicated question is what happens afterwards.
If governments use the proceeds to reduce fuel taxes or provide targeted compensation, consumers could benefit directly. If the money is allocated to other programmes, the effect on petrol and diesel prices would be indirect.
There are also unresolved questions concerning investment, competitiveness and taxation of multinational companies. Critics argue that repeatedly changing the tax treatment of energy profits could discourage investment, while supporters counter that extraordinary gains generated by exceptional market disruptions should contribute to the cost of managing those disruptions. The European Commission is currently assessing the new proposal rather than committing to a specific tax.
The political debate is therefore moving towards a very concrete question: if Europe were to repeat the 2022 experiment, how much could it collect in 2026 and how much of that money could actually reach consumers?
The first answer can be estimated from corporate profits and the chosen tax formula. The second requires looking at the price of fuel itself: and that will be the decisive calculation in understanding whether a new windfall tax could make a meaningful difference at the petrol station.
