Updated: July 2023

Revised Energy Tax Directive
Proposal for a COUNCIL DIRECTIVE restructuring the Union framework for the taxation of energy products and electricity (recast) COM/2021/563 final:

On the 14th of July 2021, the European Commission put forward a new proposal to revise Council Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity.

The Directive fixes minimum taxation rates for the taxation of energy products used as motor fuels, heating fuel, and electricity.
Member states are obliged to tax these products at least at the rates fixed by the Directive, but are otherwise free to set higher taxation rates.

With the revision, the Directive will be brought up to date in light of the EU Green Deal and Fit for 55 targets for a reduction in greenhouse gas emissions levels.
The worry of the European Commission is that the rules set forth in the Directive fail to accomodate the alternative fuels that have been developped since its adoption in 2003, and the rules do not promote energy efficiency or the implementation of cleaner fuel types.
This means, among other things, that exemptions and incentives for the use of fossil fuels in the aviation and maritime transport sectors will be removed, for instance concerning kerosene and heavy oil.
Instead, clean technologies and fuel types will be promoted by fostering investments and implementing more transparent and secure rules for investors and innovators.

Concretely, the revised Directive will bring a new structure of tax rates based on the environmental performance and energy content of various fuel types and electricity rather than on their volume, and a broadened taxable base which includes a wider range of products and activities, for example such that mineralogical processes are also included.
This will ensure a proportionality between the taxation and the level of pollution that applies for each fuel type.
During a period of 10 years, the tax rate for polluting fuel types will gradually increase, whereas the development and use of sustainable fuel types will be promoted through a minimum taxation rate of zero.

Read more about the key elements of the proposed revision here.