Revision of the energy taxation directive (ETD)

In “A European Green Deal”

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On 14 July 2021, the Commission tabled a proposal for a revision of the Energy Taxation Directive (ETD), as part of the Fit for 55 package. Its aim is to align the taxation of energy products with EU energy and climate policies, promote clean technologies and remove outdated exemptions and reduced rates that currently encourage the use of fossil fuels.

The main changes include the following points:

  • Fuels will start being taxed according to their energy content and environmental performance rather than their volume, helping businesses and consumers alike to make cleaner, more climate-friendly choices; According to this ranking, conventional fossil fuels, such as gas oil and petrol will be taxed at the highest rate and electricity at the lowest rate.
  • Products are categorised for taxation purposes in a simplified way in order to ensure that fuels most harmful to the environment are taxed the most;
  • Exemptions for certain products and home heating will be phased out. Thus, fossil fuels can no longer be taxed below minimum rates;
  • Fossil fuels used as fuel for intra-EU air transport, maritime transport and fishing should no longer be fully exempt from energy taxation in the EU.

The proposal requires unanimity in the Council for its adoption, following consultation of the European Parliament and the European Economic and Social Committee (special legislative procedure).

The European Economic and Social Committee adopted an opinion on the Energy Taxation Directive in January 2022.

In the European Parliament, the proposal is being examined by the Economic and Monetary Affairs Committee (ECON). The appointed rapporteur is Johan Van Overtveldt (ECR, Belgium). The ECON rapporteur delivered a draft report in February 2022, which was then opened to amendments. In July 2023, the ECON committee sent a letter to the Commission to request an updated detailed assessment of the impact of the proposal. A committee vote has not been scheduled yet.

In the Council, a close examination of the proposal is taking place in the Working Party on tax questions. A first round of legal analysis was completed in November 2021. One year later, the Czech presidency provided an update to the ongoing negotiations on the proposal. The Czech presidency noted that some Member States are not yet in a position to support the Presidency text or have scrutiny reservations. Nevertheless, the majority of Member States expressed a positive opinion on the suggested changes and the way forward. Further work was still needed, on e.g. the pace of the implementation, the abolition of some exemptions for the aviation and maritime sectors, the minimum levels of taxation, the interaction of the ETD with other initiatives of the Fit for 55 package, etc. In June 2023, the Council, under the Swedish Presidency, noted it had made further progress on the file and had found a number of compromise solutions.

In November 2023, the Council took stock again of the state-of-play of the file. During its mandate, the Spanish Presidency had organised discussions on minimum levels of taxation and the proposal's indexation mechanism, the special treatment of natural gas and LPG,  wood taxation and the interaction between the future ETD and the state aid rules. Nevertheless, the Council concluded that positions among delegations were still 'divergent on several crucial issues'.

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Further reading:

Author: Pieter Baert, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/03/2024.