On 23 July 2020, the European Commission launched public consultations on two initiatives that aim to maximise the impact of taxation in meeting the EU’s climate goals. The revision of the Energy Tax Directive (ETD) and the creation of a Carbon Border Adjustment Mechanism (CBAM) were identified in the European Green Deal as means to help with the transition towards a greener and more sustainable economy, together with the European Green Deal investment plan, the just transition mechanism and other measures. In addition, the Commission’s Recovery Plan for Europe indicated that green own resources could contribute to financing the future EU budget, for recovery and growth in the wake of the COVID-19 pandemic.
The revision of the Energy Tax Directive should overhaul the way in which energy products are taxed in the EU, to better reflect the EU’s climate ambitions. This includes revising minimum rates for fuels and re-thinking current tax exemptions, to reduce the implicit subsidies for fossil fuels and certain economic sectors. The aim is to re-shape energy taxation in a way that encourages consumers and businesses to behave in a more environmentally way.
In parallel, in view of the EU’s increase climate ambition, a Carbon Border Adjustment Mechanism for certain sectors would help to reduce the risk of carbon leakage. With a Carbon Border Adjustment Mechanism the price of imports would reflect more accurately their carbon content. This would ensure that the EU’s green objectives are not undermined by production relocating to countries with less ambitious climate policies.
All interested parties are invited to share their views on the revision of the Energy Tax Directive and a new Carbon Border Adjustment Mechanism via two separate consultations available below: