Key facts
- The European Commission plans to propose a measure to lower electricity bills by taxing natural gas more heavily than electricity.
- This initiative aims to encourage the electrification of transport, heating, and industry.
- Energy-intensive industries could see reduced electricity taxes to maintain competitiveness.
- The proposal seeks to bypass unanimous member state approval for tax legislation by altering electricity market design rules.
- A study on Italy revealed electricity taxes up to four times higher than natural gas taxes for households.
- The Commission also intends to address rising network costs and taxes, which constitute a significant portion of electricity bills.
The European Commission is preparing to unveil a plan aimed at reducing electricity bills for consumers and businesses by shifting taxation away from electricity and towards natural gas. This initiative comes amid significant energy price shocks, geopolitical instability in the Middle East, and pressure on Europe's power grids.
The proposal, detailed in a document seen by Euronews, seeks to create a more favorable tax environment for electricity to accelerate the bloc's transition to electrification in transport, heating, and industry. For energy-intensive industries, governments would be granted more flexibility to reduce electricity taxes, potentially to zero, to maintain competitiveness.
To circumvent the need for unanimous member state approval on tax legislation, the Commission plans to embed this principle within electricity market design regulations. This approach would require member states to reduce the tax differential between electricity and gas, as noted by the NGO Climate Action Network Europe.
A study by Italian think tank ECCO highlighted a substantial tax imbalance in Italy, where electricity taxes and levies are significantly higher than those on natural gas for both households and businesses. This disparity penalizes electrification and slows down the energy transition, according to ECCO's co-founder Matteo Leonardi.
The Commission's plan also addresses the growing share of network costs and taxes in electricity bills. These costs, which often outweigh the price of electricity consumed, are expected to rise as the EU invests in grid expansion and renewable energy integration. The International Energy Agency has cautioned that grid capacity is not keeping pace with the growth of clean energy technologies.
Negotiations among EU member states are anticipated to be difficult, as taxation is a national competence. Sweden has already voiced opposition to the Commission's grid plan, particularly regarding the use of congestion charge revenues for infrastructure upgrades. The Commission's proposed solution involves redesigning tariff structures to incentivize efficient grid usage, encouraging consumption during periods of high renewable generation. The widespread deployment of smart meters is deemed crucial for consumers to benefit from these dynamic tariffs, with targets set for significant coverage by 2030 and 2033.