EU Commission to Propose a Review of the Energy Taxation Directive

The European Commisison has announced that it will put forward a proposal to review Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity (Energy Taxation Directive) on 13 April 2011.

The current Directive 2003/96/EC

The currently applicable directive entered into force on 1 January 2004. It sets taxation rules for energy products and electricity that are used as motor or heating fuel or electricity generation. Other uses, as raw materials or for chemical reduction, etc. are not covered. It extends the EU system of mandatory minimum rates of taxation applicable to mineral oils to coal, natural gas and electricity. The background idea is therefore to establish a level playing field between the different energy products and reduce distortions of competition. The minimum levels of taxation applicable by category are defined in the annexes to the directive. For example: natural gas for motor fuels, 2.6 EUR/gigajoule; electriicty, 0,5 EUR/MWh for business use. The directive alllows Member States to provide for differentiated rates of taxation, based on a series of criteria. The review of Directive 2003/96/EC by 1 January 2012 was foreseen in the directive itself.

Another instrument in the Europe's 2020 Strategy

The European Commission justifies the review of the directive by the necessity to put it in line with the ambitions set in the Europe's 2020 Strategy. Directive 2003/96/EC already includes provisions in favour of more environmentally friendly energy uses, which were aimed to implement the commitments taken in the Kyoto Protocol, and in particular incentives in favour of efficient use of energy, resulting in CO2 emissions reductions and less dependence on imported energy. Member States can also adopt tax advantages to undertakings introducing measures aimed to reduce their emissions. (See Communication on Tax policy in the EU, COM(2001)260 final, dealing in part with energy and environmental taxation, pp.11-13). These aspects will now be strengthened. The structure of energy taxation will be revised, based on the CO2 emissions and the the energy content of each energy product, in accordance with the objectives of the EU energy and climate policies.

See also previous post here on Commission's decision to take France to Court for infringement of the Energy Taxation Directive as regards electricity.

Reference: DG TAXUD website.