Energy Taxation Directive

re-aligned with EU climate and energy objectives

The long awaited revised Energy Taxation Directive (‘ETD’) aims to ensure that the taxation of energy products and electricity better reflects the impact they have on the environment and on health, by removing disadvantages for clean technologies and introducing higher levels of taxation for inefficient and polluting fuels. The revised ETD forms an integral part of the Green Deal legislative package, together with among others an update of the EU ETS and the Carbon Border Adjustment Mechanism.

Climate-neutral by 2050

As a short background, the EU has set ambitious goals to become climate-neutral by 2050. In order to achieve the EU’s objectives, the ETD required a revision. The current ETD is not in line with these objectives and does not provide sufficient incentives for investments in clean technologies. Next to that, following various exemptions and reductions it de facto favours fossil fuel use. Lastly, the minimum tax rates have lost their effect. The revised ETD aims to tackle these main flaws and might result in changes on the taxation of energy generated or used, leading to changes in cost price. The ETD further deals with current uncertainties in the market, such as the taxability of hydrogen and possible double taxation of electricity storage.

COUNCIL DIRECTIVE restructuring the Union framework for the taxation of energy products and electricity (recast)

What does this mean for your company?

The various proposed changes to the ETD will impact all businesses, especially when using less sustainable energy products or electricity. The increase of minimum rates, updated tax base (based on energy content) and changes in exemptions and/or reductions may have a significant impact on the cost price of various products. Upon adoption, the revised ETD will have to be transposed into domestic legislation by the Member States. This provides a window of opportunity for addressing matters that are not (sufficiently) covered by current local legislation, such as the energy tax treatment of (green) hydrogen and (avoiding) double taxation of storage. 

Legal framework

The revised ETD is drafted as an update of the current directive.This means that unanimity is required in the EU Council for adoption. Once adopted, the revised ETD should be implemented into domestic legislation of the EU Member States. The revised ETD is expected to enter into force on 1 January 2023.

Next steps

Upon adoption of the ETD by the European Parliament, Member States should align their domestic energy taxation legislation with the revised ETD. These updates likely will have an impact on all businesses, but most importantly energy intensive business and the power & utilities sector.

As a first step, it is important to monitor the adoption process of the revised ETD and the developments on updating local energy taxation legislation. The required update of local legislation provides a window of opportunity for addressing matters that are not (sufficiently) covered by current legislation.

In case of any questions on the revised ETD, we are happy to discuss what the revised ETD will mean for your organisation. Feel free to contact us!

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Chris Winkelman

Chris Winkelman

Energy - Utilities - Resources Industry, Tax, Partner, PwC Netherlands

Tel: +31 (0)65 154 18 97

Niels Muller

Niels Muller

Partner, Energy transition and sustainable energy, PwC Netherlands

Tel: +31 (0)65 160 08 61

Sander Borremans

Sander Borremans

Senior Manager Indirect Taxes, PwC Netherlands

Tel: +31 (0)61 029 42 75