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Euractiv, 08.09.2022 | Axel Ockenfels

“[…] There appears to be a more straightforward and much less intrusive way to use the wholesale electricity market to skim the windfall profits of the gas crisis: Tax the revenues from inframarginal power production, but only when gas-fired power plants are marginal. Because the tax is levied only when gas-fired power plants are operating, the tax effectively skims (only) the windfall profits from high gas prices. Of course, the net price paid to inframarginal producers must remain above the marginal costs of supply. Then, all available low-cost generation capacities deliver electricity whenever gas-fired plants set a high market price, implying that all windfall profits are equally affected, regardless of what contracts underlie them or where trade occurs.”

Link to article: https://www.euractiv.com/section/energy/opinion/a-simple-proposal-to-skim-electricity-firms-windfall-profits/

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