As energy prices have declined, European countries have switched the focus of their windfall profits taxes—a one-time taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. levied on a company or industry when economic conditions result in large, unexpected profits—from energy providers to the banking and financial sector.
As early as March 2022, the European Commission recommended that Member States temporarily impose windfall profits taxes on all energy providers in its REPowerEU communication. The Commission suggested such measures should be technologically neutral, not retroactive, and designed in a way that does not affect wholesale electricity prices or long-term price trends. In October 2022, the Council of the European Union agreed to impose an EU-wide windfall profits taxA windfall profits tax is a one-time surtax levied on a company or industry when economic conditions result in large and unexpected profits. Historically, such taxes have targeted oil and energy companies when costs have risen, especially from war or other crises., or “solidarity contribution,” on fossil fuel companies (oil, gas, coal, and refining sectors), though with a different design than the Commission’s recommendations. At the same time, a cap was set on market revenues for electricity generators that use infra-marginal technologies to produce electricity, such as renewables, nuclear, and lignite.
The EU anticipated that the two policies would jointly raise about €140 billion, of which €25 billion would be revenues from oil and gas companies collected through the solidarity contribution. The revenue would then be used to partially offset households’ high energy bills “in a non-selective and transparent measure supporting all final consumers.”
According to the 2025 European Commission report on the solidarity contribution, between 2022 and 2023, 16 of the 27 Member States applied the solidarity contribution, while eight adopted an equivalent national measure. Three countries—Luxembourg, Latvia, and Malta—reported that they do not have in-scope companies. Although the revenue collected for fiscal years 2022 and 2023—€26.15 billion—slightly exceeds the €25 billion estimate, the figures show notable discrepancies. Apart from the three countries that reported no companies in scope, three others—Finland, Lithuania, and Sweden—reported, for now, zero revenues from this policy to the European Commission, and there is no other data publicly available. Cyprus never adopted the regulation. Additionally, since Croatia applied the windfall tax to all sectors in the economy, it hasn’t reported any revenues from this policy specifically.
Therefore, out of the 27 EU Member States, only 19 have revenue data available on the solidarity contribution or an equivalent measure. Furthermore, the Commission’s report reveals that the revenues from the solidarity contribution accounted for just 7 percent of the total cost of the energy support measures implemented by Member States, which amounted to €340 billion.
Although no longer a part of the EU, in 2022, the British government also implemented a windfall profits tax that exclusively targets companies engaged in oil and gas extraction.
As energy prices have declined and capital costs have risen, however, the profits of oil, gas, and coal sectors have dropped as well. In response, some countries have begun shifting the scope of the windfall tax from energy producers or oil and gas companies to the banking and financial sector. Currently, the Czech Republic, Hungary, Lithuania, Romania, Slovakia, and Spain have extended the scope of the windfall profits taxes to cover these sectors.
The windfall taxes in Europe differ significantly in their structures and their tax rates (ranging from 2 percent in Romania to 60 percent in the Czech Republic and Lithuania).
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