Energy Taxation Directive: Europe’s key climate law stuck in a quagmire

(EurActiv, 20 May 2023) Talks to revise the 20-year-old Energy Taxation Directive are moving at a snail’s pace amid resistance from EU countries in a matter that requires unanimity among the 27.

At the turn of the century, European Union countries realised that while they had imposed minimum taxation rates on oil products, other sources of energy were not subject to similar duties. 

This endangered the proper functioning of the EU’s single market, they concurred, and the Energy Taxation Directive (ETD) was adopted in 2003.

The directive set out minimum tax levels on all types of energy, ranging from transport and heating fuels to electricity. Thanks to the directive, EU countries could no longer engage in price dumping to undercut each other and the single market was preserved.

But the law, which taxes fuels based on their energy content per volume – or euros per litre – is no longer fit for purpose as Europe aims to reach climate neutrality by 2050. 

Moreover, numerous exemptions were added – for aviation or maritime fuels used in fishing boats.

To address this, the European Commission tabled a revision in July 2021 as part of its ‘Fit for 55’ plan aiming to halve greenhouse gas emissions by the end of the decade.

Instead of a volume, “fuels will start being taxed according to their energy content and environmental performance,” the EU executive announced at the time

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EurActiv, 20 May 2023: Energy Taxation Directive: Europe’s key climate law stuck in a quagmire