Policies & Issues

Energy Taxation


What is it?

On 13 April 2011, the European Commission presented its proposal to revise the outdated rules (Directive 2003/96/EC) on the Taxation of Energy products (ETD) in the European Union.  The proposal should change the way energy products will be taxed in the future (as of 1 January 2013), thereby aiming to remove imbalances and taking the CO2 emissions and energy content of energy products into account.  The Commission proposes to split energy taxes in two parts, which together will determine the overall tax-rate of a product: the first part is linked to the CO2 emissions of the energy product and the second is based on the energy content of products.

  • CO2: a single minimum rate for CO2 emissions (20 €/t CO2) would be introduced for all sectors not covered by the EU Emission Trading Scheme (ETS).  This would provide a carbon price for these sectors of the economy, namely households, transport, smaller businesses and agriculture that are outside the scope of the EU ETS. Renewable energy sources would not be subject to this CO2 element.
  • Energy: minimum tax rates for energy would be based on the energy content of a fuel (€/GJ) rather than the volume. This means that a fuel will be taxed on the basis of the amount of energy that it generates, and greater energy efficiency will automatically be rewarded. The energy component of the tax will help to remove current distortions for competing energy sources (for example petrol and diesel) and will make taxation fairer for consumers because energy content is more important than volume when it comes to energy consumption.


Why is it important?

The proposal should foster energy efficiency, the use of renewable energy sources and investment in the green economy. Finally, a revised Energy Taxation Directive with a CO2 element would prevent a patchwork of national policies from creating obstacles and distortions in the Internal Market. 


Our viewpoint

Orgalime anticipates a possibly negative impact of the revision on those sectors exposed to so-called “carbon-leakage”.  Whereas these sectors have been exempted from taxation under the ‘old’ Directive, the revision foresees to “provide for transitional measures so as to avoid an undue cost impact while maintaining environmental effectiveness of CO2-related taxation”.  The Commission will take appropriate follow-up action to ensure that all sectors susceptible to “carbon leakage” are subject to the same treatment under the future ETD.


How we have been engaged

The revised Directive will apply from 2013, to work in parallel with the third phase of the EU ETS.  There shall be an appropriate phase-in period for member states to restructure their taxes and to give national administrations, businesses and the energy sector time to adjust.  Long transitional periods for the full alignment of taxation of the energy content, until 2023, will leave time for industry to adapt to the new taxation structure.  Orgalime is monitoring this issue closely in its Energy Working Group and is in contact with the European Commission to ensure equal treatment of the carbon leakage issue.


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