On 14 July 2021, the European Commission adopted a package of proposals to make the EU's climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Achieving these emission reductions in the next decade is crucial to Europe becoming the world's first climate-neutral continent by 2050 and making the European Green Deal a reality. With today's proposals, the Commission is presenting the legislative tools to deliver on the targetsagreed in the European Climate Law and fundamentally transform our economy and society for a fair, green and prosperous future.
As part of the overall European Green Deal package, the Commission has delivered two priority files in the form of a Carbon Border Adjustment Mechanism which will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage', and a proposed revision of the Energy Taxation Directive which will safeguard and improve the Single Market and support the green transition by setting the right incentives.
Carbon Border Adjustment Mechanism
Climate change is a global problem that needs global solutions. As we raise our own climate ambition and less stringent environmental and climate policies prevail in non-EU countries, there is a strong risk of so-called ‘carbon leakage’ – i.e. companies based in the EU could move carbon-intensive production abroad to take advantage of lax standards, or EU products could be replaced by more carbon-intensive imports. Such carbon leakage can shift emissions outside of Europe and therefore seriously undermine EU and global climate efforts. The Commission’s proposal for a Carbon Border Adjustment Mechanism (CBAM) should prevent the risk of carbon leakage and support the EU’s increased ambition on climate mitigation, while ensuring WTO compatibility.
Revision of the Energy Taxation Directive
Taxation initiatives at both EU and Member State level can help us reach our climate policy goals by encouraging a switch to cleaner energy, more sustainable industry and more environmentally friendly choices, as part of a socially fair green transition. In guiding these initiatives, the EU’s common framework for energy taxation – the Energy Taxation Directive or ETD – should play a central role. The new proposal for its revision aims to align the taxation of energy products with EU energy and climate policies, promote clean technologies and remove outdated exemptions and reduced rates that currently encourage the use of fossil fuels. In this way, we can reduce the harmful effects of energy tax competition, and help secure revenues for Member States from green taxes, which are less detrimental to growth than taxes on labour.
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