Energy taxation: Council calls for an updated framework contributing to a climate neutral EU

The Council adopted conclusions on the EU energy taxation framework.

The conclusions are a direct response to the European Council’s call to advance work on the conditions, incentives and enabling framework to ensure a transition to a climate-neutral EU, in line with the Paris Agreement. The aim is to contribute to the policy objectives and measures to achieve the environmental, energy and climate targets for 2030, while preserving European competitiveness, ensuring just and socially balanced rules and respecting member states’ right to decide on their own energy mix.  

The energy taxation directive adopted in 2003 identifies energy products subject to harmonised rules for excise duties, sets minimum levels of taxation and lays down conditions for applying tax exemptions and reductions, ensuring the proper functioning of the internal market. While the directive initially made a positive contribution to the internal market, current rules do not contribute to the new EU regulatory framework and policy objectives in the area of climate and energy, while technology, national tax rates and energy markets have all considerably evolved over the past 15 years.

The Council therefore supports an update of the legal framework for energy taxation contributing to wider economic and environmental EU policy objectives.

For that purpose, the Council calls on the Commission to analyse and evaluate possible options for a possible revision of the energy taxation directive which would reflect the EU and members states’ current needs. In doing so, the conclusions invite the Commission to give particular consideration to the scope of the directive, minimum rates and specific tax reductions and exemptions.

In addition the conclusions call on the Commission to update provisions, as appropriate, in order to ensure that they are practicable and provide greater certainty and clarity in its implementation, taking notably into consideration:

  • the treatment of biofuels and other alternative fuels,
  • the applicability of control and movement provisions to certain products, such as treatment of lubricants and designer fuels,
  • new energy products and technologies,
  • relevant sectors, such as aviation, taking into account their specificities and existing exemptions and international dimension,
  • impacts on government revenues,
  • state aid processes and rules.

The Council also highlights the importance of fully assessing its proposals in terms of their economic, social and environmental costs and benefits and their implications for competitiveness, connectivity, employment and sustainable economic growth, particularly for sectors most exposed to international competition.