Portugal Co-Signs EU Call for Windfall Tax on Energy Companies as Iran War Drives Prices Higher

Five Finance Ministers Demand Brussels Revive the 2022 Emergency Levy — Portugal's Fernando Medina Among the Signatories

Portugal has joined Germany, Italy, Spain, and Austria in calling on the European Commission to impose a bloc-wide windfall profit tax on energy companies, arguing that surging oil and gas prices triggered by the Iran war are creating "market distortions" that demand collective action.

The joint letter, addressed to EU Climate Commissioner Wopke Hoekstra and dated 4 April, was first reported by Reuters. It marks the first time since the 2022 energy crisis that a group of major EU member states has formally lobbied Brussels for an extraordinary levy on energy sector profits.

What the Letter Says

The five finance ministers — including Portugal's Fernando Medina — argued that the windfall tax would serve two purposes: funding temporary consumer relief without straining public budgets, and sending "a clear message that those who profit from the consequences of the war must do their part to ease the burden on the general public."

The letter explicitly referenced the 2022 emergency regulation, which raised approximately EUR 29 billion from oil and gas companies across the EU, and called on the Commission to "swiftly develop a similar EU-wide contribution instrument grounded on a solid legal basis."

No specific tax rate was proposed. The European Commission confirmed it had received the letter and said it was "working closely with member states on possible targeted policy measures in response to the current energy crisis facing Europe."

Why Now — and Why It Matters for Portugal

Oil and gas prices have spiked sharply since the US-Israeli strikes on Iran began on 28 February, creating a price shock comparable to the one Europe endured after Russia's invasion of Ukraine. For Portugal, which imports virtually all of its fossil fuels, the impact is acute.

Diesel prices in Portugal broke through the EUR 2 per litre barrier earlier this month for the first time, squeezing haulage firms, agriculture, and household budgets simultaneously. While this weekend brings a rare reprieve — DGEG has forecast a six-cent drop in diesel from Monday — analysts warn the relief is likely temporary as long as the Middle East conflict continues to disrupt supply routes.

Portugal's position is made more precarious by the fact that it holds just four months of commercial jet fuel stocks, the lowest in Western Europe after the Netherlands, according to Argus Media data reported earlier today.

The 2022 Precedent — and Its Limits

The 2022 windfall levy, formally the "temporary solidarity contribution," was applied to fossil fuel companies whose taxable profits exceeded 120 per cent of their average over the previous four years. It raised substantial revenue — but it also drew fierce criticism from the energy industry.

Germany's BDI industry association has already rejected the new proposal, calling it "the wrong approach" that risks deterring investment in energy infrastructure. Spain's wind industry body, AEE, warned that a poorly designed levy could hit renewable energy companies alongside fossil fuel firms, undermining the green transition.

These concerns are not academic for Portugal. The country has made significant strides in renewable energy — wind and solar now account for roughly half of domestic electricity generation — and policymakers will need to ensure that any new levy does not penalise the clean energy investments they have spent a decade encouraging.

What Happens Next

The Commission is expected to present its assessment in the coming weeks. Any new levy would require either unanimity among all 27 member states (for a tax measure) or a qualified majority (if structured as a solidarity contribution under emergency provisions, as in 2022). The political dynamics are significantly different from 2022: the war in Iran has created a broader coalition of affected states, but several Eastern European members — dependent on different energy mixes — may be harder to convince.

For Portuguese consumers, the immediate question is whether any windfall revenue would translate into tangible price relief. In 2022, Portugal used its share primarily to fund fuel subsidies for public transport and direct payments to vulnerable households. Whether a similar mechanism would be deployed this time depends on both the design of the levy and Lisbon's own fiscal priorities — which are already under pressure from the EUR 4 billion cut Portugal faces in the next EU budget cycle.

Sources: Reuters, Fortune/AP, Euronews, DGEG, Argus Media