Energy Taxation Directive

The Energy Taxation Directive or ETD[1] (2003/96/EC)[2] is a European directive, which establishes the framework conditions of the European Union for the taxation of electricity, motor and aviation fuels and most heating fuels. The directive is part of European Union energy law; its core component is the setting of minimum tax rates for all Member States.

Directive 2003/96/EC
European Union directive
TitleCouncil Directive 2003/96/EC of 27 October 2003, restructuring the Community framework for the taxation of energy products and electricity
Made byCouncil
Made underTreaty of Rome, especially Article 93
Journal referenceL283, 31 October 2003, pp. 51–70
History
Date made27 October 2003
Came into force31 October 2003
Implementation date31 December 2003
Current legislation

Purpose and scope

The directive is intended to ensure the functionality of the EU internal energy market and to avoid distortions of competition through different tax systems. In addition, it should also contribute to a low-carbon, energy-efficient economy, that is, to exert a steering effect with the aim of protecting the environment and the climate.[3]

For this purpose, it sets EU-wide minimum tax amounts for electricity and for fuels when they are used as motor fuel, aviation fuel or heating fuel. The minimum tax amounts vary according to the type of fuel (petrol, kerosene, gas oil, liquid and natural gas) and their use. When used as a heating fuel or when used in, for example, stationary engines, agriculture or construction machinery for public works, lower minimum amounts apply than when used as motor fuel. The Member States have extensive freedom in the design of taxes, the directive only requires that the indirect taxes reach the minimum amounts without value-added tax (VAT).[3]

There are a number of exceptions to the directive:[3]

  • Lower taxes are permitted for commercial diesel.
  • Tax exemptions and reductions may be granted for environmental and health reasons.
  • Tax exemptions are possible for renewable energy sources and electricity for public transport.
  • Tax reductions are possible for energy-intensive businesses.
  • Some energy-intensive sectors, such as the metal industry, as well as substances that can be used for various purposes, for example for both heating and the production of chemical substances, are exempt from the directive.
  • There are also a number of special and transitional rules for many Member States.

Member States are advised to largely exempt commercial aviation and commercial shipping in the European Community's marine waters (referred to as 'air navigation and sea navigation'), but Member States are allowed to limit these exemptions (Preamble §23). For example, Member States may levy taxes on kerosene (jet fuel) below the minimum rate for domestic flights and flights between Member States that have concluded a separate bilateral agreement (Article 14(1)(b) and (2)).[4]:4

Development

The directive replaced Directive 92/81/EEC[5] and Directive 92/82/EEC[6] – which only harmonised mineral oil taxes – after ten years of negotiations.[7] European primary law,[8] which is the legal basis for the directive,[9] requires a unanimous decision of the European Council for tax law requirements. Unanimous decisions are also required for changes to the directive. When they were introduced in 2004, the tax rates in most countries were above the minimum tax amounts. In 2008, the Council asked the Commission to come up with proposals on how to better align the Directive with the energy and climate targets of the European Union. The Commission concluded in 2011 that the directive was unsustainable and that it provided the wrong incentives.[10] It proposed an amendment that would have set the minimum rates based on energy content and CO2 emissions. However, the proposal met with opposition from Luxembourg, Poland and, according to internal voices, Germany as well. In 2015 the Commission removed the proposal from its work programme.[11]

According to the March 2020 feedback report of Transport and Environment, 'the Energy Taxation Directive (ETD) has not been reviewed since 2003, and needs updating if the European Commission is serious about deploying its European Green Deal.'[1] It is said to be revised in 2021.[12]

See also

References
  1. Jo Dardenne (March 2020). "The Energy Taxation Directive. T&E's feedback on the Inception Impact Assessment" (PDF). Transport and Environment. Retrieved 14 June 2020.
  2. Official long title: Council Directive 2003/96/EC of 27 October 2003, restructuring the Community framework for the taxation of energy products and electricity. Published in the Official Journal of the European Union no. L 283, 51 on 31 October 2003.
  3. "EU rules for the taxation of energy products and electricity". Summaries of EU Legislation, EUR-Lex. Publications Office. 28 November 2016. Retrieved 14 June 2020.
  4. Jasper Faber and Aoife O’Leary (November 2018). "Taxing aviation fuels in the EU" (PDF). CE Delft. Transport and Environment. Retrieved 14 June 2020.
  5. Council Directive 92/81/EEC of 19 October 1992 on the harmonization of the structures of excise duties on mineral oils
  6. Council Directive 92/82/EEC of 19 October 1992 on the approximation of the rates of excise duties on mineral oils
  7. Erwägungsgrund (1) der 2003/96/EG.
  8. Primary law is the supreme source of law in the European Union, deriving from seven categories: founding treaties, amending treaties, accession treaties, protocols annexed to those treaties, supplementary agreements amending specific sections of the founding treaties, the Charter of Fundamental Rights of the European Union (since the Treaty of Lisbon), and general principles established by the Court of Justice of the European Union (CJEU)."The European Union's primary law". Eur-Lex. Publications Office. 13 March 2020. Retrieved 16 June 2020.
  9. Article 113 Treaty on the Functioning of the European Union (former Article 93 TEC).
  10. European Commission (2011). "Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee – Smarter energy taxation for the EU: proposal for a revision of the Energy Taxation Directive" (PDF)., Format: PDF, KBytes: 63
  11. Mikael Skou Andersen, I. Parry, K. Pittel, H. Vollebergh (2017), "A Comment on "Reforming the EU Energy Tax Directive: Assessing the Options"", Energy Tax and Regulatory Policy: Reform Priorities, ISBN 978-0-262-03639-9CS1 maint: multiple names: authors list (link)
  12. ETC revision in 2021
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