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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. 

Affordability of energy for households and industry is one of the Commission’s key priorities for 2024-2029 and taxation has a major role to play in achieving more affordable energy.

Revision of the energy taxation rules

The proposal for a revision of the Energy Taxation Directive 2003/96/EC aims 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  • remove outdated exemptions and reduced rates that currently encourage the use of fossil fuels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. 

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

The Commission’s proposal would 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. The proposal is currently being discussed by EU countries.

Recommendations on taxation

EU countries can already lower electricity bills, but greater ambition is needed, especially in the areas of taxation and network charges. 

The Commission put forward in July 2025 recommendations on tax incentives to support clean technology investments , such as renewable energy systems or energy-efficient machinery, and will make further recommendations in 2026 to EU countries to lower national taxes on electricity, immediately reducing energy bills. 

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.

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