Joint Industry position: Reforming energy taxation, charges and levies to support affordability
Read the full industry position here.
Europe needs lower and more predictable energy bills for all energy carriers, faster electrification based on decarbonised energies where it is feasible and cost-efficient from an energy system perspective, and pragmatic decarbonisation options where electrification is not. Fiscal policy design choices must support affordability, fairness and competitiveness across households and industry or risk distorting markets and raising system costs for all.
1) Key messages
1. Cut what does not belong in energy bills, for all energy carriers. Non-energy items should be financed through general budgets.
2. Rebalancing must not create new injustices or competitiveness risks. Fiscal energy policy should not unduly increase costs for consumers and users with limited near-term alternatives.
3. Price signals for individual energy carriers should reflect system costs (e.g. peak and seasonal demand) life-cycle CO₂ intensity, end-use realities.
4. Tax energy at final consumption only. Energy flows within the energy system, including conversion between carriers and storage should not be taxed, in order to maximise system efficiency and avoid cumulative fiscal burdens.
2) Industry assessment of the Commission's draft approach
Industry supports efforts to reduce unnecessary cost components in energy bills of all energy carriers; improve transparency and predictability of taxes, levies and charges; and avoid double taxation, including for storage and energy conversion.
However, directly shifting policy-related costs from electricity bills onto other energy carriers, or indirectly offsetting reductions in system-related electricity charges by increasing fiscal contributions on other energy carriers, risks creating new economic, social and competitiveness distortions. This is particularly problematic for households and industrial users that cannot electrify quickly, and may ultimately reduce system efficiency and undermine public support for the energy transition. It also exaggerates the root issue that is correctly identified by this recommendation: the unfair shuffling and allocation of fiscal pressure to energy carriers.
For electricity generation, we consider that taxes, as well as charges levied - including when generated throughout other energy carriers - should be structured so as to minimise impacts on wholesale electricity formation and retail prices, while maximising system efficiency and minimising total costs for final consumers. This requires avoiding taxation at conversion stages and applying fiscal instruments only to end consumption.
3) Core principles for reform (please download the industry position to read core principles for reform in detail):
a) Allocate costs where they belong
b) Technology openness
c) Fairness, competitiveness and a just transition
4) Policy recommendations (please download the industry position to read policy recommendations in detail):
a) Taxation including VAT
b) Remove non-energy-related levies from energy bills, not just electricity bills.
c) Make electricity and other energy carrier charges more cost-reflective.
d) Avoid double taxation and support system integration.
e) Renewable and low-carbon molecules.
Download the full statement below.
