The EU executive plans to raise around €140bn (£121bn) by imposing windfall taxes on energy companies’ “abnormally high profits” and redirecting proceeds to households and businesses struggling with soaring bills, the Guardian reports. Under the European Commission’s proposals, oil, coal, gas and refining companies would be required to contribute 33% of their taxable surplus profit for the 2022-23 fiscal year, the Guardian explains. In addition, “the commission wants EU member states to sign up to a legally binding target to cut electricity use by 10% overall and by 5% during peak hours, via efficiency campaigns and incentives”. In her annual state of the union speech in the EU parliament, Commission president Ursula von der Leyen said: “In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers. In these times, profits must be shared and channelled to those who need it most,” reports Reuters. EU countries will have to negotiate the Commission’s proposals and agree on final laws, notes another Reuters article. The plan did not include an earlier idea to cap Russian gas prices, which had divided countries, the newswire says: “With gas price caps off the table, at least for now, some diplomats were optimistic that deals could be struck at a meeting of EU energy ministers on 30 September”.

Reuters reports that “British and Dutch gas prices rose” on the news of the omitted price cap. Bloomberg reports that “the fever in European gas markets has eased in recent weeks, with prices falling about 40% as storage levels look healthy, painful industry shutdowns destroy demand and policymakers draw up emergency measures to help with the crisis”. In parallel, von der Leyen announced the creation of a new gas market benchmark to reflect the EU’s rapid shift from imported pipeline gas to liquified natural gas (LNG), reports Climate Home News. “We have to diversify away from Russia,” von der Leyen is quoted saying, noting that pipeline gas supplies from Moscow have now fallen to 9% of EU gas consumption from around 40% last year. BusinessGreen also has the story, while Politico has five charts about von der Leyen’s speech. The Financial Times reports that the US shale industry has warned it cannot rescue Europe with increased oil and gas supplies this winter. And the Daily Telegraph reports that the head of the International Monetary Fund (IMF) has warned that Europe could face “some social unrest” if there is a cold winter.

The Financial Times says the Commission is also proposing “a mandatory threshold for prices charged by companies that produce low-cost, non-gas energy, such as nuclear and renewables groups”. It explains: “Companies would have to give EU states the ‘excess profits’ generated beyond this level, which the commission seeks to set at €180 per megawatt hour. But member states would be free to put in place lower thresholds of their own. Energy commissioner Kadri Simson said the commission’s level would cover the operating costs of lignite, a type of coal that is the most expensive non-gas fuel.” Politico describes the proposals for “deep reforms” of the EU electricity market as a “startling shift for the Commission”. It notes that “as recently as May, the Commission called the bloc’s electricity market “well-functioning”. It explains: “Countries like Spain and France, though, had long been calling for changes, slamming the current system’s so-called merit order, under which the electricity price is set by the last and most expensive input – usually natural gas. That means if gas becomes expensive, it raises all electricity prices, even those generated by much cheaper renewables. The worry in Brussels was that tinkering with the structure could undermine future investments in renewables and endanger the EU’s Green Deal goals.” At the same time, “the crisis created by the brinkmanship with Russia is having a serious impact on the EU”, say the Financial Times Disrupted Times newsletter. It points to reporting elsewhere in the FT that “industrial groups in the euro area suffered their biggest monthly fall in production for more than two years in July, underlining the impact of surging energy prices and supply chain bottlenecks on the region’s growth prospects”. The FT‘s Lex column suggests what the EU “should do to ease the financial pain of a cold winter”. It picks out three measures: reducing demand for energy, better integrating Europe’s gas pipelines better and “delink[ing] renewable electricity prices from expensive gas”.

Separately, Reuters reports that the EU parliament voted yesterday “to raise the bloc’s targets to expand renewable power and save energy, backing proposals that had been made more ambitious in a bid to quickly end Europe’s reliance on Russian gas”. The newswire adds: “[The Commission proposals] will apply for a few months but over the longer term, Brussels is betting on a massive rollout of wind and solar capacity to provide cheap, locally generated power – improving Europe’s energy security and curbing greenhouse gas emissions. The Parliament backed a target to get 45% of EU energy from renewable sources by 2030, compared with 22% in 2020.” In France, president Emmanuel Macron’s government said it would spend a further €16bn to cap energy prices next year, on top of the €29bn it has already paid out, says the Times. However, the cap will be lifted partially, leading to a 15% rise in electricity and gas prices next year, the paper adds. Politico reports that the Eiffel Tower will turn off its flashing lights one hour earlier than usual as a “symbolic measure [that] is part of a broader energy-saving plan” for Paris. In the UK, the Independent reports that prime minister Liz Truss “has come under renewed pressure to extend the government’s windfall tax on oil and gas giants” after the European Commission set out its plans. In Slovakia, Reuters reports that loading of fuel has been completed for the long-delayed Mochovce 3 nuclear power plant, “making it one of the few new nuclear units to come online as Europe struggles with a power supply crunch”. And in Ukraine, prime minister Denys Shmyhal said the country has reached an agreement with the US on the supply of 2bn cubic metres of gas over the fourth quarter of 2022 and the first three months of 2023 to ensure “sufficient reserves” for the winter, reports Reuters.

In an exclusive, the i newspaper reports that the UK government’s Energy Bill “is set to be paused or ditched completely as Liz Truss focuses on capping customers’ bills and reforming the UK’s electricity market”. According to “multiple sources”, Jacob Rees-Mogg, the new secretary of state for Business, Energy and Industrial Strategy, told officials on Monday “that he planned to effectively put on hold the Energy Bill currently going through the House of Lords”, the paper says. The legislation, which was part of Boris Johnson’s last Queen’s Speech, was “wide-ranging and would have overhauled everything from carbon dioxide transport to carbon capture and civil nuclear power production”, the paper says. The bill now faces “being scrapped or dramatically reworked”, with the government looking to decouple electricity prices from the global gas price and move to “locational pricing” to incentivise the private sector to build extra capacity. The paper adds: “Abandoning parts of the Energy Bill could mean ditching a landmark reform, the creation of the ‘future systems operator’ arm of the National Grid that Johnson hoped would secure renewable energy to hit the UK target of net-zero carbon emissions by 2050. The Department for Business, Energy and Industrial Strategy was contacted for comment but it refused to speculate on the future of the Bill. Parliament will be updated on its plans when it returns from recess next week.

Meanwhile, the Financial Times reports that the UK government has said it will backdate “if necessary” any support for UK companies facing soaring energy bills, in an attempt to allay fears that the new scheme will struggle to launch before November. The paper adds: “In an attempt to reassure struggling companies, the government said on Wednesday that it would confirm further details of the business support scheme next week. That update is expected to form part of chancellor Kwasi Kwarteng’s ‘fiscal event’ or mini-Budget on Thursday or Friday.” The Press Association also has the story. The Daily Telegraph reports on estimates suggesting that the UK’s cap on energy prices – which allows firms to make a margin of 1.9% on energy that they sell to the public – will “fund profits of up to £1.6bn…even though the Treasury is partly responsible for footing this cost”.

Separately, the Daily Telegraph reports that “both France and Britain are looking to each other for electricity supplies this winter, raising the possibility of a cross-Channel power crunch if demand spikes on both sides at the same time”. The paper adds: “France is normally a major exporter of power to Britain and the continent, but outages on its nuclear fleet turned it into a net importer during the first half of the year. In its winter outlook report published on Wednesday, French grid operator RTE said it will require ‘close co-operation’ with neighbouring countries over electricity supplies this winter, including Britain.”

The European parliament has called to end public subsidies for the practice of burning wood for fuel, reports the Guardian, but campaigners warned the plans risked being “too little, too late”. The paper continues: “Voting on an amendment to the EU’s renewable energy directive, MEPs called to ‘phase down’ the share of trees counted as renewable energy in EU targets. But they swerved setting any dates to reduce the burning of ‘primary wood’.” This includes “healthy, standing trees logged for fuel, or fallen trees”, the paper says, adding: “Trees cut down for fire protection or road safety reasons may continue to benefit from renewable energy subsidies, under the parliament’s proposals.” The burning of woody biomass, and its categorisation as a renewable energy source, has “become a topic of intense debate among scientists, policymakers and activists around the world”, says the Financial Times. The paper reports the comments of Pascal Canfin, a French MEP who heads the environment committee, who said: “Burning primary biomass is definitely not the best way to use this biomass so it doesn’t make sense to subsidise [it]…It’s fake that biomass is carbon neutral. It is using the carbon stock of the last decade and you burn it now.” The proposed rules must now be negotiated by the European institutions before they become law, the paper notes.

The International Energy Agency (IEA) has forecast that Russian oil production will fall by 17% by February – compared with production before the Ukraine invasion – once an EU embargo on Moscow’s exports comes into full force, reports the Financial Times. It continues: “Although the drop of 1.9mn barrels a day is smaller than the 3m b/d losses the IEA predicted in March, the forecast points to the impact the EU ban on Russian crude and refined petroleum products could have even if significant volumes are rerouted to other markets. Russia…pumped almost 11m b/d of crude and products in August, only marginally down on its output before it invaded Ukraine in February, the Paris-based IEA said. It expects that to fall to 10.2m b/d in December and to 9.5m b/d by February 2023.” Bloomberg adds that the IEA also said that Russia’s oil-export revenues contracted to $17.7bn in August, the lowest since at least March, “as a decline in crude prices more than offset higher supplies abroad”. The Times reports that the IEA has also forecast that “a faltering China and a slowdown in advanced economies will lead to growth in global oil demand grinding to a halt in the fourth quarter” this year. However, Reuters notes that the IEA also expects “global oil demand growth will rebound strongly next year as China eases Covid lockdowns”.

China’s “efforts” to make sure it is “well-stocked” with its “mainstay fuel” for what “promises to be a grueling winter for energy markets has received a “boost”, Bloomberg reports, with the completion of a new rail line in Mongolia. The outlet says the rail line could “haul as much as 50m tonnes a year to the border”, citing the Mongolian president Khurelsukh Ukhnaa. The rail “spur” is also “expected to be a boon for Mongolian miners”, the outlet adds, saying that they “rely on China to buy nearly all of their exports”.

Meanwhile, Li Ruisheng, chief engineer of the Chinese ministry of housing and construction is quoted saying that the construction sector is an “important area of energy consumption and carbon emissions” in China and an “important force in achieving carbon peaking and carbon neutrality”, by the state-run industry newspaper China Energy News. Separately, the South China Morning Post reports that the Chinese government has “approved construction of the world’s largest pulsed-power plant with plans to generate nuclear fusion energy by 2028”, citing the “top nuclear weapons scientist leading the project”.

In other energy news on China, Reuters writes that China is buying “more and less expensive energy supplies” from Russia this year, adding that this move “reaps the benefits of a plunge in European purchases just when Beijing needs it most as the Ukraine crisis pushes Moscow in search of alternative markets”. Elsewhere, the Global Times reports that Shelek wind farm, the “first new energy project jointly built” by China and Kazakhstan, “started operation” on Tuesday. The state-run newspaper adds that the wind farm can “generate 230GWh (gigawatts-hours) of electricity per year”. Finally, Bloomberg says that “cheap hydropower lured energy-intensive aluminum producers” to China’s Yunnan province, but “more frequent droughts due to climate change” are “upending what seemed like a win-win”.

The Egyptian government is defending itself from accusations of price gouging, reports Climate Home News, “as delegates complain of inflated hotel room rates and cancelled bookings for the COP27 climate summit”. It continues: “During a logistics briefing on Tuesday, green and youth groups told the Egyptian hosts they were being priced out of the conference. They described as ‘unprecedented’ the barriers to securing affordable accommodation in the Red Sea beach resort of Sharm el-Sheikh and obtaining visas.” The outlet has previously reported on a letter from the Egyptian Hotel Association (EHA) to hotels in the city setting out minimum prices for rooms during the climate summit as it would bring a “unique tourism opportunity”. Since then, it continues, “delegates who made early bookings have had their reservations cancelled and been told to pay three to six times the price initially advertised”. A spokesperson for the hotel association told Climate Home News that the directive followed a decision from the government committee in charge of organising COP27. However, the outlet adds, the Egyptian government has distanced itself from the memo and the directive “hasn’t been recorded in Egypt’s official gazette, nor passed as law”.

According to German finance minister Christian Lindner, Germany could gain around $10bn by “skimming off” windfall profits from energy companies benefiting from market disruption, reports Bloomberg. The levy details are to be discussed “as soon as possible”, notes the outlet. It adds that the revenues from the levy will be used to finance part of a €65bn relief package unveiled this month to help citizens and companies cope with soaring energy prices. Chancellor Olaf Scholz’s ruling coalition “backed European Union proposals to tax windfall profits after surging earnings at some energy companies triggered public outrage”, according to the article. However, another Berlin-planned levy – on German gas consumers “faces delays” and “doubts”, reports another Bloomberg story. It says that measure, proposed by economy minister Robert Habeck, was due to go to cabinet for approval on Wednesday but was removed at short notice because several government departments hadn’t signed it off. The leading energy lawmaker for the Greens, Ingrid Nestle, is quoted as saying that the gas levy “will neither be imposed nor distributed by 1 October.”

Meanwhile, the Associated Press reports that the German government could take a majority stake in energy supplier Uniper, a jump from the roughly 30% stake that the state already has pledged to take. The article explains that now, Uniper is majority-owned by Finland-based Fortum, in which the Finnish government holds the largest stake. Reuters also has a story, adding that Uniper, Germany’s largest importer of Russian gas, “burned through its cash reserves sourcing gas on the expensive spot market” after Moscow cut flows to Germany, triggering a rescue package with Berlin agreed in July. But that package, which has already grown to €19bn, “is no longer enough”, notes the outlet.

In more energy news, Frankfurter Allgemeine Zeitung reports that under the current conditions, the German coal industry, which was reactivated to save more gas, “does not see itself in a position to provide the additional power generation capacities desired by the federal government”. At a press conference by the Association of Coal Importers, power plant operators, coal transporters and coal traders said that “the perspective of only running until April next year is far too short and the link to the gas shortage is far too strict for the necessary investments to be worthwhile”.

Additionally, Die Zeit reports that extending the three German nuclear power plants’ service life would reduce the country’s electricity price by 4% in the coming year, according to calculations by the ifo Institute. However, extending the lives of the nuclear plants is “not a 1:1 replacement for natural gas,” ifo’s electricity expert Mathias Mier is quoted saying. The outlet notes that vice-chancellor Habeck proposed last week that two of the three nuclear power plants still in operation in Germany be transferred to a temporary operational reserve by the end of the year.

The Biden administration yesterday reinstated $190m worth of leases to companies bidding to explore for oil and gas in the Gulf of Mexico, reports the Washington Post. The paper explains: “The Bureau of Ocean Energy Management granted the 307 oil and gas leases as part of a compromise that won support last month from Senator Joe Manchin III for the Inflation Reduction Act and its roughly $369bn in climate-related spending and tax credits. The Lease Sale 257, which had been held in November 2021, had been invalidated by a federal judge in February.” The bureau stressed that it was complying with the new law, but simultaneously seeking to minimise environmental impacts of any drilling and oil production from the newly awarded leases, reports Bloomberg. It quotes a statement from the bureau saying: “Leases resulting from this sale include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species and avoid potential ocean user conflicts.“ The New York Times looks at “where the new climate law means more drilling, not less”. (For more on the Inflation Reduction Act, see Carbon Brief‘s coverage.)

Elsewhere, Reuters reports that the US House Natural Resource Committee’s oversight panel held a hearing and released a report detailing the “deceptive” and “misleading” tactics used by public relations firms to help their oil and gas clients fight off climate policies and mislead the public about climate change. DeSmog also has the story. At the same time, the Guardian reports on news research showing that “Republican-led legislatures have passed anti-protest laws drafted by an extreme right corporate lobbying group in a third of all American states since 2018, as part of a backlash against Indigenous communities and environmentalists opposing fossil fuel projects”.

European Commission president Ursula von der Leyen has announced that the European Union will double its firefighting capacity to help countries cope with increasingly devastating climate change impacts, Reuters reports. In her state of the union speech, von der Leyen said: “These events are becoming more and more frequent and more and more intense… The EU will buy 10 light aircraft and three additional helicopters to complete its fleet,” the newswire reports.

Meanwhile, Reuters reports that a wildfire raging since Monday in south-western France prompted authorities to evacuate an extra 500 people yesterday, “bringing the total to over 1,000 in an area already hit this summer by huge blazes”. In the US, Reuters reports that a “fast-growing California wildfire was threatening a string of small foothill communities north-east of Sacramento” yesterday. It adds: “The Mosquito Fire has burned nearly 59,000 acres (24,000 hectares), forcing the evacuation of some 11,000 people… The fire, one of about a dozen burning across California on Wednesday, grew by about 3,000 acres (1,210 hectares) overnight.”

The Guardian’s financial editor Nils Pratley looks at the European Commission’s proposed energy windfall tax and compares it with the UK’s “non-windfall tax approach”. The European plan is “definitely…bolder in making its levy on generators upfront and compulsory”, Pratley says, but “the obvious drawback is that the EU hasn’t designed its measures on a fuel-by-fuel basis”. He explains: “A cap at €180 [per megawatt hour] squeezes coal plants whose input costs have also risen, but it is still extremely generous towards nuclear plants and windfarms, whose costs are fixed and substantially lower. Member states can set lower thresholds if they wish, but that’s for the future.” In contrast, the UK’s approach is “to negotiate with nuclear, wind, solar and biomass generators to secure lower wholesale energy prices quickly – albeit at the risk, as many have pointed out, of giving away too much future value via new contracts for difference”. There is now “a read-across figure for the UK to aim at”, says Pratley, adding: “But there is still scope to craft a more finely tuned package that applies different prices to different forms of local generation. We’re not much further on: UK ministers still need to be aggressive – and transparent – in their deal-making.”

In the i newspaper, chief political commentator Paul Waugh says that “Labour strategists believe that [prime minister Liz] Truss has walked right into their trap over the issue, by failing to impose a tighter windfall tax to fund her energy bill cap”. But, he notes, “if Truss’s streamlined approach can cap bills, radically reform our energy market and make net-zero more practicable, her legacy in office could be longer-lasting than Boris Johnson’s. It could help the planet, and maybe even her party’s electoral chances too”.

In related comment, a Daily Mail editorial ponders whether the tide is “finally…turning in the war on inflation” and predicts that “Liz Truss’s bold energy price freeze should deal spiralling prices a massive blow”. The Daily Telegraph‘s business reporter Matt Oliver says that “Putin’s gas blackmail risks backfiring disastrously” as “Europe is finding a way to survive without Russian fuel”. And independent economist Julian Jessop writes in the Daily Telegraph (not yet online) under the headline: “Businesses must not get a blank cheque for energy bills”.

New research finds that over 2011-20, Arctic sea ice thickness was 1.87 metres at the start of the melt season in May, and 0.82 metres by its end in August. The authors use deep learning and numerical simulations to produce a dataset of sea ice thickness across the Arctic for the Arctic melt period. The paper “​​unlocks opportunities for understanding Arctic climate feedbacks on different timescales”, according to the authors. For example, “sea-ice volume observations from the early summer may extend the lead time of skilful August–October sea-ice forecasts by several months, at the peak of the Arctic shipping season”, they say.