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Energy Taxation Directive
Directive 2003/96/EC (‘Energy Taxation Directive’ or ETD) aimed to identify the energy products subject to the harmonised rules for excise duties, set minimum levels of taxation and lay down the conditions for applying tax exemptions and reductions. It also helped to prevent double taxation and other distortions on the Single Market. An evaluation of the Directive was carried out in the framework of a Commission's Regulatory Fitness and Performance (REFIT) programme. It found that the framework laid down then by the Directive is no longer adapted to today’s energy system, technologies and climate ambitions. For this reason, the Directive is currently being revised under the Fit for 55 legislative package.
In its EU Green Deal, the European Commission clearly states that the tax burden should shift from labour to pollution. The proposed revision intends to orient the directive with the climate objectives of the Union. The main proposed changes relate to the move to base taxation of energy products on their energy content (instead of volumes) and rank them with different minimum taxation rates depending on their environmental performance; phase-out of exemptions for certain products and home heating, and lastly, fuels for intra-EU air, maritime and fishing are no longer fully exempt from taxation.
One of the only files still waiting adoption by the co-legislators, the ETD revision is still under early negotiation by the Parliament’s Economic and Monetary Affairs Committee and by the . Working Party on tax questions. At the time of writing, neither side has finalised its position on the file.
What’s in it for hydrogen?
Energy taxation will be a cornerstone to facilitate a prosperous future for hydrogen. As a sustainable alternative fuel and considering the uptake the Commission wants to provide them under the Fit for 55 and the REPowerEU strategy, hydrogen could benefit from financial incentives and from a consistent and coherent taxation framework.
Under the proposed revision of the directive, the switch to renewable and low-carbon fuels is heavily incentivised. Carbon-intensive fuels are to be taxed more, while preferential tax rates for renewable and low-carbon hydrogen will serve to stimulate their use in multiple applications, among which maritime and aviation. For example, under the proposed minimum tax rates regime, renewable hydrogen and low-carbon hydrogen together with electricity, biogas and advanced sustainable biofuels benefit from the lowest minimum tax rate. Conversely, fossil fuels are to be taxed in the highest minimum tax rate, with LNG, natural gas and non-renewable fuels of non-biological origin, to be placed in the second highest minimum tax rate.
Links to the original document and additional information:
Directive 2003/96/EC1 (‘Energy Taxation Directive’)
