EU Drafts Plan for Electricity Tax Cuts and Accelerated Clean Energy Shift
EU’s Response to Energy Crisis and Clean Energy Transition
By Kate Abnett
Overview of the Draft Plan
BRUSSELS, April 14 (Reuters) – The European Union plans to reduce electricity taxes and expand clean technologies rapider to cut consumers’ exposure to soaring oil and gas prices, as part of its plan to offset the Iran war’s energy impact, a draft document revealed.
Europe’s heavy reliance on oil and gas imports has left it exposed to spiralling prices since the Strait of Hormuz, a vital global oil and gas shipping route, was effectively closed and Tehran started attacking energy infrastructure in the Middle East.
Key Proposals in the Draft
Short-Term Measures and Long-Term Goals
The draft European Commission proposal, due to be published on 22 April, sets out short-term measures aimed at curbing energy bills, as well as plans to wean Europe off fossil fuels rapider, to protect the continent from future oil and gas supply disruptions.
“The benefits of this transition clearly outweigh its costs. Europe cannot afford to remain exposed to increasingly frequent energy shocks,” the draft declared. “Every delayed investment in the energy transition risks greater cost for society at a later stage.”
Electricity Taxation Changes
The EU executive in May will propose legal modifys to the bloc’s taxation rules that would ensure electricity is taxed at a rate below that of fossil fuels, and build it clearer for governments to cut energy-intensive industries’ electricity taxes to zero, according to the draft.
Investment in Clean Technologies
It declared the EU will also present countries’ energy ministers next month with a catalogue of energy-saving investments and low-carbon technologies to replace oil and gas, and a legal proposal requiring countries to incentivise investments in smart grid technologies, to assist bring more clean energy sources into the power mix.
Supporting Industest and Infrastructure
The draft was reported earlier on Tuesday by Bloomberg News.
Market Impact and Further Measures
Gas Prices and Storage Coordination
European gas prices nearly doubled in the three weeks after the U.S.-Israeli war on Iran launched on February 28, and despite retreating since, were still around 35% above pre-war levels on Tuesday.
Other elements of the draft EU plan, which could modify before it is published, would see the EU step in, starting this month, to coordinate countries’ gas storage filling, to avoid price hikes cautilized by companies rushing to acquire at the same time.
Electrification Tarreceives
Brussels also plans to propose an electrification tarreceive before summer, to push industries to switch from fossil fuels to electricity, the draft declared.
Challenges and Next Steps
Approval Process and Previous Attempts
A European Commission spokesperson declined to comment on the draft document.
Changing EU tax rules requires the unanimous approval of member nations, and recent attempts have failed. A 2021 Commission proposal to amfinish electricity taxes – which also aimed to incentivise the shift from fossil fuels – is still stalled.
(Reporting by Kate Abnett; Editing by Paul Simao)
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