As EU Member States are slowly warming up to  establishing  taxes on carbon,  EU Tax Commissioner on April 13 outlined plans for a draft of a new Directive. The carbon tax draft is based on fuel energy intensity rather than volume and will exempt fuels made from biomass and electricity, already taxed under the ETS regime.

The revised Energy Taxation Directive will allow Member States to make the best possible use of taxation and proposes splitting the minimum tax rate into two parts:

  • One would be based on CO2 emissions of the energy product and would be fixed at €20 per tonne of CO2.
  • The other one would be based on energy content, i.e. on the actual energy that a product generates measured in Gigajoules (GJ). The minimum tax rate would be fixed at €9.6/GJ for motor fuels, and €0.15/GJ for heating fuels. This will apply to all fuels used for transport and heating.

This proposal will favour renewable energy sources and encourage the consumption of energy sources emitting less CO2. At the moment, the most polluting energy sources are, paradoxically, the least taxed. On the contrary, biofuels are amongst the most heavily taxed energy sources in spite of EU’s commitment to increase the share of renewable energies in transport. The new proposal will remove these inconsistencies. Social aspects are taken into account with the option for Member States to completely exempt energy consumed by households for their heating, no matter what energy product is used.

Long transitional periods for the full alignment of taxation of the energy content, until 2023, will leave time for industry to adapt to the new taxation structure.

The EHA in earlier discussions with the Commission has been told that the new Carbon Tax plans could benefit the introduction of hydrogen as well.  The EHA will review the plans on the actual impact of the Commission’s plans on the use of hydrogen as a fuel.