The Government in Madrid has issued a decree extending the temporary tax on windfall profits of energy companies to 2025, Prime Minister Pedro Sanchez announced on Monday, after Spanish lawmakers voted last week to eliminate the tax, Reuters reports.

The decree will enter into force on January 1, but will have to be confirmed by Parliament within 30 days to remain valid next year, as the minority government intends, which could be difficult to achieve because the governing partners are at odds on this issue.

With this extension, Madrid is respecting its commitments made to its partners, as it has requested “an additional effort” from energy companies and at the same time a tax incentive “that takes into account strategic investments essential for decarbonization” has been introduced, Sanchez said, according to Agerpres.

Utilities have warned that extending the 1.2% tax, which targets companies with a turnover of at least €1 billion, will jeopardise €30 billion in renewable energy investments.

The temporary tax was set up in 2022 and was intended to ease the cost of living pressures for ordinary Spaniards, as banks have benefited from high interest rates and energy companies have benefited from a surge in energy prices since the war in Ukraine.

The government also extended temporary subsidies that allow for reduced fares on public transport by six months in its last meeting this year. In addition, a 2.8% increase in pensions was approved, which will benefit about 12 million pensioners, Sanchez said.