EU struggles with the Energy Taxation Directive, between environmental and market sustainability

The current Energy Taxation Directive regulations regarding aviation and waterborne transport remain unchanged, maintaining the respective provisions of the currently applicable rules.

This is what emerged after the meeting of ministers from EU Member States, coordinated by the Hungarian presidency of the Council, on the revision of the Energy Taxation Directive (ETD), a European directive – as part of the Fit for 55 package – that establishes the framework for the taxation of electricity, motor and aviation and heating fuels. 

“There is a need to take into account the EU’s environmental targets and Member States’ economic, geopolitical and social circumstances, in particular in relation to the most sensitive sectors” stated the Hungarian presidency representatives. Adding that regarding the taxation of aviation and waterborne navigation sectors: “after testing various ideas, the presidency suggested essentially maintaining the respective provisions of the currently applicable rules for the time being and to come back to the issue in 2035”.

When it comes to the green transition, the issue never changes: EU should strike a balance between ensuring the proper functioning of the internal markets while preserving environmental protection. 

“I think everyone here is aware that the Commission proposed a clearly more ambitious text to achieve the significant levels of decarbonisation that we, frankly speaking, need by 2030. Decarbonisation is both a climate strategy and a competitiveness and an economic strategy” highlighted the European Commissioner for Climate, Net Zero and Clean Growth Wopke Hoekstra. 

Concerning the Energy Taxation Drive, however, certain improvements have been made compared to the original directive, namely giving a price signal by differentiating taxation of fuels according to their environmental performance and an overall increase of the minimum levels of taxation and the introduction of indexation. 

While, thus, with regard to aviation and waterborne taxation the situation remains unchanged, a sharp distinction remains among the  Member State representatives who attended the meeting: those who would like to have a more environmental approach and those who believe that the needs of individual States (and markets) should be taken into account. 

“it is necessary to be realistic and verify the economic sustainability for the individual industrial sectors. It is important that the compromise on the directive proposal finds the right balance between the need to define a European framework for the taxation of energy products and the need to ensure the competitiveness of the European industry” stated the Italian delegation, echoed by the Greek one: “the specific proposal may cause problems to tourism through increasing costs of aviation and waterborne navigation. We believe that it may undermine the competitiveness of Greek tourism”. 

“This concerted effort has to lead to a level playing field for all countries – added the Maltese delegation – For Malta, it is about basic accessibility. The only two ways one can access Malta is either by sea or air transport.”

Other countries, on the other hand, have been more critical of the revision, saying that “We can only regret the exclusion of the air sector and the shipping one, because it will prevent us from reaching the goals that we have set ourselves in the recent years” (France); “It is clear that the current directive is outdated and that modernization is necessary” (Sweden) and “we already have a taxation which comes in the form of an air ticket tax and we generally are in favor of a harmonized air ticket tax at the EU level” (Germany).