Energy Taxation Directive

The Energy Taxation Directive (ETD) establishes the EU framework for taxing energy products and electricity. Its ongoing revision seeks to align energy taxation with the EU’s climate, energy and industrial policy objectives by better reflecting the environmental performance of fuels and energy sources.

The revision is highly relevant to the refining sector because taxation directly influences the competitiveness of energy products, investment decisions and the market uptake of renewable and low-carbon fuels. The European Commission’s recast proposal provides an opportunity to modernise the EU taxation framework and improve harmonisation across Member States.

A more coherent and technology-neutral approach can help reduce market fragmentation, support decarbonisation and ensure a level playing field across energy carriers and sectors.

FuelsEurope’s Position and Recommendations

For the revision of the ETD, FuelsEurope recommends:

  • Harmonising implementation across the EU to reduce distortions of competition caused by divergent national taxation regimes.
  • Supporting renewable and low-carbon fuels through differentiated taxation that rewards lower carbon intensity and strengthens the business case for investment.
  • Avoiding double taxation by maintaining exemptions for fuels and energy used as energy sources in manufacturing processes and associated logistics activities.
  • Applying a consistent taxation methodology across sectors, while allowing tax rates to reflect the specific use of energy in transport, heating and industry.
  • Supporting a competitive and resilient European refining industry, recognising its role in energy security, industrial value chains and the transition to lower-carbon fuels.

 

What is the Energy Taxation Directive?

The Energy Taxation Directive establishes the EU framework for taxing energy products and electricity. Its revision aims to align energy taxation more closely with the EU’s climate, energy and industrial policy objectives by better reflecting the environmental performance of different fuels and energy sources.

Why does the Energy Taxation Directive matter to the refining sector?

The Energy Taxation Directive affects the competitiveness of energy products, investment decisions and the market uptake of renewable and low-carbon fuels. A clear and harmonised taxation framework can reduce market fragmentation and provide stronger signals for investment in the transition to lower-carbon energy products.

How can energy taxation support renewable and low-carbon fuels?

A differentiated taxation that reflects the lower carbon intensity of renewable and low-carbon fuels can strengthen the business case for investment, support their market uptake and contribute to the decarbonisation of transport, heating and industry.

Why does FuelsEurope support greater harmonisation of energy taxation across the EU?

Differences between national taxation regimes can distort competition and fragment the EU market. FuelsEurope therefore supports more harmonised implementation of the Energy Taxation Directive across Member States to help create a consistent framework and a level playing field for energy products and producers.

What does FuelsEurope recommend for the revision of the Energy Taxation Directive?

FuelsEurope recommends a harmonised, consistent, and technology-neutral taxation framework across sectors that rewards lower carbon intensity and supports renewable and low-carbon fuels. It should also avoid double taxation and recognise the specific use of energy in transport, heating and industry.

How can the Energy Taxation Directive support European industrial competitiveness?

A coherent and technology-neutral taxation framework can help reduce market fragmentation, provide clearer investment signals and support the transition towards renewable and low-carbon fuels. FuelsEurope considers that the revised Directive should also recognise the role of a competitive and resilient European refining industry in energy security, industrial value chains and the lower-carbon transition.