European Commission considers 2003 Energy Taxation Directive outdated

The European Commission (EC) considers the Energy Taxation Directive (ETD) (2003/96/EC) is outdated and not in line with European Union energy and climate policy, according to an evaluation report released by the EC.

The ETD lays down rules for the taxation of energy products used as motor or heating fuels and electricity. It also estates minimum tax rates for such products in the European Union. 

The EC carried out an evaluation of the ETD to look at the performance of the Directive against the basic principles of relevance, effectiveness, efficiency, coherence and EU added value. According to the EC, the current rules do not contribute to the new EU regulatory framework and energy and climate policy objectives. The EC highlights the extensive use of optional tax exemptions in the EDT, has led to too much discrepancy between national tax rates and the minimum rates. This undermines the unity of the single market and the liberalisation of the energy markets. The non-harmonisation of national taxes for the same fuels has led to market distortions. As a consequence, a relocation of the consumption of motor fuels and heating fuels can be witnessed, especially in frontier areas between the Member States.

Back in 2011, the EC had already proposed a reform on the ETD to link energy content and CO₂ emissions of energy products when establishing the minimum taxation rates. Although the European Parliament and the European Economic and Social Committee received the proposal positively, Member States could not settle on the main political aspects of it. Negotiations rolled down for four years until the EC withdrew its proposal.