Energy taxation directive no longer supports environmental objectives

A European Commission evaluation report has concluded that the directive no longer provides an effective framework for keeping tax rates in line with environmental policy objectives.

The energy taxation directive sets out rules for the taxation of energy products used as motor or heating fuels and for electricity generation. The report concludes that while the directive initially made a positive contribution to the internal market, it no longer contributes to the new EU regulatory framework and policy objectives in the area of climate and energy, where technology, national tax rates and energy markets have all evolved considerably over the past 15 years.

Since the directive was introduced in 2003:

• the share of renewable energy in the EU’s energy mix has tripled, reaching 18%;
• the share of renewable electricity has increased from 13% to 31%;
• consumption of biofuels has increased 10-fold and the share of biofuels in transport grew from virtually zero to almost 5%; and
• several new products including hydrogen and synthetic gases entered the market.

There is now no link between the minimum tax rates of fuels and their energy content and CO2 emissions. See bit.ly/2lMz0c2.

EU finance ministers discussed climate change and the Commission’s evaluation of the directive at the informal ECOFIN meeting in Helsinki on 14 September. Speaking after the meeting, Finland’s Minister of Finance, Mika Lintilä, said: ‘We all agreed that energy taxation can be used to further the achievement of climate and energy objectives. I’m confident the outcome of our discussion will be taken into account if the decision is made to revise the energy taxation directive.’