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EU energy tax reform remain on hold till 2025

Negotiations to overhaul Energy Taxation Directive further delayed to 2025

The new Hungarian presidency of the Council of the EU has confirmed that it will not be looking to rekindle stalled discussions on revised taxation of aviation and marine fuels. Some countries oppose the revised emergency break drafted by the Hungarian presidency presented at its first ECOFIN meeting. Finding ways to include new tax rules in these areas have blocked a wider agreement for new taxes on energy.

Talks to modernise the Energy Taxation Directive (ETD).  ETD sets minimum tax or levies on fuel, energy and electricity across the EU.  They are widely considered too low to support the EU’s climate objectives.

After meeting with other member states in the past week, Hungary confirmed that it will be unlikely to find any new ETD compromises during its presidency – the second half of 2024. It had proposed a number of small adjustments to the emergency tax break clauses, but this proved insufficient for objecting states.

In May 2024, the Belgian Presidency of the EU Council had conceded that there will likely be no progress on talks to modernise ETD. Despite numerous compromises to the text, delegates were resigned to move talks to after the June 2024 EU Parliament elections.

Talks to review a second Belgian compromise (cuts to aviation fuel) in April made little progress.

Jan 2024 New attempt on Energy Taxation Directive overhaul to reflect green ambitions of net-zero greenhouse tax emissions by 2050

The European Commission is to put forward to EU Finance Minister’s tax working group on 24 February 2024 a revised text for an overhaul for the ETD.

The Directive set minimum excise rates on prescribed types of fuels and energies in 2003. Thanks to the directive, EU countries could no longer engage in price dumping to undercut each other and the single market was preserved. However, numerous exemptions were added – for aviation or maritime fuels used in fishing boats. This new version will seek to remove outdated exemptions and reduced rates that currently encourage the use of fossil fuels. Maritime shipping is one of the sectors whose generous exemptions could be abolished by the directive – but faces opposition from Spain and Portugal.  This includes a pivot away from taxing energy efficient electricity production towards oil and fossil gas.

Attempts to reform in 2011 failed due to lack of unanimous support from many states still dependant of coal and other fuels. Luxembourg, Poland and reportedly Germany were the main opponents. They are asking for longer transitional periods in sectors where sensitive exemptions are being abolished.

It works alongside the existing Emissions Trading Scheme (ETS) and the proposed Carbon Border Adjustment Mechanism (CBAM).

Energy Taxation Directive (2003/96/EC)

The Directive covers minimum excise duty rates on: motor; aviation; shipping; domestic heating fuels; and domestic electricity. It aims to support the Union’s green objectives to use minimum tax levels to encourage the switch to renewable energy. But also to ensure no distorting competition by under taxing fuels across borders.

2022 reforms: Minimum rates on energy content and CO2 emissions; withdrawal of exemptions

As with the 2011 attempted reforms, the new round of reforms will focus on energy source emissions, and how to link to duty rates. Minimum rates will be based on the energy content (expressed in euros per gigajoules) of each product. In this way, the new system will ensure that the most polluting fuels are taxed the highest. Many exemptions will also be removed – notably aviation kerosene and shipping heavy oil. It will be linked to the European Green Deal, the Commissions measure to help tackle greenhouse gas emissions.



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