The European Union has agreed to adopt emergency measures to tax the record earnings of energy companies.

Ministers have agreed to impose windfall taxes on certain energy businesses and mandate electricity consumption reduction.

The idea includes a tax on the excess profits of fossil fuel companies and a tax on the excess revenues generated by rising power rates.

The expected recipients of the funds are families and businesses.

However, the bloc is divided over whether and how to cap wholesale gas prices.

It comes at a time when Europe is bracing for a harsh winter due to the cost of living problem and the tightening of the global energy supply.

The EU is attempting to wean itself off of Russia’s energy, but it has been forced to scramble for alternate, costly sources.

A government imposes a windfall tax on a company to target firms that benefited from something they were not responsible for, i.e., a windfall profit.

Oil and gas prices are significantly higher than they were a year ago, due in part to increasing demand as the world emerges from the pandemic and, more recently, to supply concerns stemming from Russia’s invasion of Ukraine.

This week, 15 member states, including France and Italy, petitioned the EU to impose a price ceiling on gas bills to curb the escalation of prices.

A decision about a price ceiling has not yet been revealed.

In May, former British Chancellor Rishi Sunak implemented the Energy Profits Levy, a tax comparable to Friday’s EU deal.

It was applied to corporations’ revenues from oil and gas extraction in the United Kingdom, but not to those that generate electricity from nuclear or wind power.