Taxes account for a significant share of the final prices consumers pay for energy around the EU and can have a strong impact on consumption and investment patterns, the type of energy consumed and their use.
This is reflected by the different rates of energy taxation in different EU countries, with important variations between households and industrial use, between different energy sources, diesel and other transport fuels, and with rates that bare little relation to the energy content or externalities, such as CO2 emissions or air pollution.
Taxation policy is an important instrument for governments to ensure achievement of the energy union objectives, and in particular to facilitate the clean energy transition, while respecting the principle of subsidiarity and proportionality. Progress towards the completion of the single energy market is on-going and energy taxation has an important role to play. For more details, see the latest 'Energy prices and costs in Europe'.
Qualified majority voting for energy and climate
As part of the 4th State of the energy union report, the European Commission published a communication on more efficient and democratic decision making in EU energy and climate policy in April 2019. This document asked the European Parliament and Council to reflect on how energy taxation could better contribute to the EU's energy and climate objectives, and how a move to qualified majority voting decision-making amongst Member States could help to unlock progress in this area. This strand of work builds on the Commission's blueprint for a gradual transition to qualified majority voting decision-making in all areas of taxation, first published in January 2019.
The current tax framework has not changed since 2003, and contains a range of incentives for fossil fuels, despite the EU’s ambitious energy and climate objectives and international commitments. These tax benefits have been persistent over the last decade in the EU and amounted to around €40 billion in 2016. A factsheet on energy taxation for energy products, published in 2019, provides more detailed figures.
In September 2019, the Commission published a report that evaluates the energy tax directive, which points out that existing gaps and inconsistencies significantly hamper the EU’s energy, climate and transport objectives.
Revision of the energy taxation rules
Driving the ambition further, the energy taxation directive 2003/96/EC will be revised in June 2021, as part of the European Green Deal. The preparatory work is underway, as a roadmap and an inception impact assessment were published in March 2020 and a public consultation is planned to follow.
Ensuring that taxation is aligned with the climate objectives is essential and the Commission proposes that the revision focuses on environmental issues and propose to use the provisions in the Treaties that allow the European Parliament and the Council to adopt proposals in this area through the ordinary legislative procedure by qualified majority voting, rather than by unanimity.
- Evaluation on the energy taxation framework (SWD(2019) 332 final)
- A more efficient and democratic decision making in EU energy and climate policy COM(2019) 177 final
- Factsheet: Energy taxation for energy products (April 2019)
- Energy Taxation Directive 2003/96/EC
- Energy prices and costs in Europe
- Excise duty on energy (DG Taxation and Customs Union)
- Evaluation of the EU framework for taxation of energy products and electricity (2018)
- Commission launches debate on a gradual transition to more efficient and democratic decision-making in EU tax policy (15 January 2019)