Skip to main content
European Commission logo
enen
Energy, Climate change, Environment
Energy

Energy taxation

Revising the EU’s energy taxation rules will align them with our energy and climate objectives, towards a cleaner, more affordable and secure energy future for Europe.

Taxes account for a significant share of the final prices consumers pay for energy around the EU and can have a strong impact on consumption and investment patterns, the type of energy consumed and their use.

Taxation policy is an important instrument for governments to ensure achievement of the energy union objectives, and in particular to facilitate the clean energy transition, while respecting the principle of subsidiarity and proportionality. The study on energy costs, taxes and impact of government interventions on investments was published in October 2020. It includes a chapter on energy taxation that examines the questions of the relation between energy taxes and energy subsidies, the relation of external costs, and how they are internalised by energy taxes. The 6th report on energy prices and costs was published in February 2025. It assesses the impact of the recent energy crisis and its aftermath.

Progress towards the completion of the single energy market is on-going and energy taxation has an important role to play in it.

Revision of the energy taxation rules

The Energy Taxation Directive 2003/96/EC will be revised in 2025 to

  • align the taxation of energy products with EU energy and climate policies
  • promote clean technologies
  • remove outdated exemptions and reduced rates that currently encourage the use of fossil fuels

The current tax framework has not changed since 2003 and contains a range of incentives for fossil fuels, despite the EU’s ambitious energy and climate objectives and international commitments.

Meanwhile, high taxes on electricity increase bills and do not disincentivise the use of fossil fuels over electricity, therefore slowing down electrification and demand for cheap homegrown electricity. VAT and energy taxation are the 2 main taxes levied on electricity, complemented by other national taxes. 

The Energy Taxation Directive will allow for a minimum taxation (excise duties) of electricity and enable EU countries to lower the tax rate down to zero where legally possible for energy intensive industries and households and for all industries in case of electricity from renewable sources.

A roadmap for the revision of the directive and an inception impact assessment were published in March 2020, following an evaluation on the energy taxation framework (SWD/2019/332 final), and 2 public consultations

Qualified majority voting for energy and climate

The Commission published a communication on more efficient and democratic decision making in the EU's energy and climate policy (COM/2019/177), as part of the 4th State of the energy union report, in April 2019. 

The document asked the European Parliament and Council to reflect on how energy taxation could better contribute to the EU's energy and climate objectives, and how a move to qualified majority voting decision-making amongst EU countries could help unlock progress in this area. This strand of work builds on the Commission's blueprint for a gradual transition to qualified majority voting decision-making in all areas of taxation, first published in January 2019.

Documents

Related links