FEANTSA Response to the European Commission Recommendation on Electricity Taxes and Levies
Following the Council of the European Union’s third unsuccessful attempt since 2021 to reach unanimous agreement on the revision of the Energy Taxation Directive (ETD) in November, Politico leaked a European Commission Recommendation on electricity taxes and levies. The Recommendation focuses primarily on adjusting the electricity-to-gas price relationship to 2.5 or above as a mechanism to incentivise electrification, decarbonisation, and energy efficiency. Reducing electricity levies and taxes can be compensated either through increased taxation of fossil fuels or through absorption into national general budgets.
While the Recommendation is non-binding and therefore less politically contentious than the ETD revision, the proposed changes in energy price ratios still entail significant distributional consequences. Impact assessment studies conducted in the context of the ETD revision demonstrate that higher fossil fuel taxation disproportionately affects low-income households and households already experiencing energy poverty, as well as Member States in Central and Eastern Europe. In these countries, energy expenditures represent a larger share of household income, reliance on fossil fuels for heating remains high, building stocks are less energy efficient, and energy poverty rates are structurally higher.
While these points were discussed and addressed during the negotiations on the ETD, the Recommendation reads as a highly technical document to incentivize electrification detached from the diverse socio-economic realities across Member States. We believe that the Recommendation could be significantly improved and the likelihood of its implementation increased, if it added adequate, feasible, and targeted proposals on how to create a socially fair path towards electrification. This should be based on evidence and be embedded in the existing Green Deal files in a way that enhances social safeguards in the green transition and ensures that no one is left behind. For more information contact: