EU Draft Would Cut Electricity Taxes While Raising Relative Burden on Natural Gas

The European Commission has drafted a proposal to make electricity taxation more favourable than natural gas taxation. The draft is scheduled for release on 15 July. Conflict in the Middle East and concerns over the Strait of Hormuz have increased EU fossil fuel costs by roughly €500 million per day, according to the Commission.

The draft document states that network charges account for 24–29% of household electricity bills and 21% of business bills, while national taxes and levies add another 24% for households and 16% for firms. The Commission wants every EU member state to ensure at least 50% of customers have smart meters by 2030 and 65% by 2033.

It argues that wider deployment will improve visibility of grid conditions and reduce the need for expensive infrastructure upgrades.

A study published on Thursday by the Italian think tank ECCO found that Italian households face electricity taxes and levies up to four times higher than those on natural gas. Leonardi said households and businesses investing in electrification are unable to fully benefit from its economic advantages.

Climate Action Network Europe stated that the Commission proposes maintaining the energy taxation rules while introducing a broad electrification principle in the electricity market design regulation. Under the Commission’s approach, member states would be required to reduce the tax differential between electricity and gas, the NGO said.

The International Energy Agency has warned that electricity connection and transmission capacity is not keeping pace with the growth of clean energy technologies.

Swedish authorities announced plans to halt construction of a new power cable to Denmark. Negotiations among EU member states are expected to be challenging because taxation remains a national competence.