Electricity should be taxed less than fossil fuels. The European Commission is preparing new rules aimed at encouraging cleaner energy use and reducing dependence on gas and oil.
“In May, the Commission will present a legislative proposal on taxation, ensuring that electricity is taxed less than fossil fuels,” spokesperson Louise Bogey said on Monday.
The initiative is a part of the AccelerateEU package, unveiled by the Commission in response to high energy prices. It also reflects its broader push to strengthen the EU’s energy independence. The goal is to reduce energy costs for households and industry, while speeding up the transition towards domestic, low-emission energy sources. Reforming the tax framework is expected to be one of the tools to achieve this.
A long-debated imbalance
The taxation of electricity and fossil fuels has long been a contentious issue within the EU. The current framework is based on the Energy Taxation Directive, which sets minimum excise duty rates. These are €0.5/MWh for electricity used by businesses and €1/MWh for non-business use, while minimum rates for motor fuels are significantly higher (for instance, €359 per 1,000 litres of petrol).
The directive also allows for a wide range of exemptions and reductions, for energy-intensive industries or agriculture. In some cases it permits substantial tax relief, even to zero, depending on how energy is used.
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In practice, electricity is often not tax-advantaged because member states exceed the minimum thresholds. Because of the national tax configuration, levies and other price components, in some cases the tax burden is even higher than for natural gas or other fossil energy sources.
The system combining minimal EU-level harmonisation with significant national flexibility leads to wide disparities in taxation across the bloc.
A faster electrification
This structure has long been under fire as one of the factors slowing electrification. Reform of the Energy Taxation Directive has therefore been under discussion for years, but has repeatedly run into political sensitivity. Taxation remains a national competence, and changes require unanimous agreement among member states.
The Commission’s forthcoming proposal should address this imbalance by strengthening the tax advantage of electricity over fossil fuels. The aim is to create a clearer price signal encouraging households and businesses to move away from fossil-based systems.
The Commission is expected not merely to propose lower taxes on electricity. But rather to adjust the overall framework so that electricity enjoys a more favourable position than fossil fuels, while also giving member states greater scope to reinforce that advantage further.
