European Commission Proposes to Overhaul Energy Taxation

13 April 2011: The European Commission has unveiled a proposal to overhaul the rules on the taxation of energy products in the EU. The proposal includes new rules to restructure the taxation of energy products to remove current imbalances and take into account both their emissions and energy content.

According to the proposal, existing energy taxes would be split into two components that, taken together, would determine the overall rate at which a product is taxed, with a view to promoting energy efficiency and consumption of more environmentally-friendly products, avoiding distortions of competition and ultimately supporting green growth. Social aspects are expected to be taken into account with the option for member States to completely exempt energy consumed by households for their heating, regardless of the energy product used.

The proposal is further expected to favor renewable energy sources and encourage the consumption of energy sources emitting less carbon dioxide, as well as to complement the existing EU Emission Trade Scheme (ETS) by applying a carbon dioxide tax to sectors that are out of the ETS scope (transport, households, agriculture and small industries). The proposal needs to be discussed by the European Parliament and the Council of Ministers of the EU, and is expected to enter into force in 2013. [EU Press Release]