Position Paper - ERCST's rationale for the submission to the Public Consultation for the Revision of the Energy Taxation Directive

Date: 14 October 2020

Author(s): Andrei Marcu, Dana Agrotti


This position paper accompanied ERCST's response to the Commission's public consultation for the revision of the Energy Taxation Directive (2003/96/EC). This paper presents the rationale behind ERCST’s submission.

From discussion with stakeholders, we consider two main priorities for the revision of the ETD:

  1. Avoiding double taxation between the EU ETS, which is seen as the main carbon pricing instrument at the European level, and the ETD, if this will be revised to tax fuels based on their carbon content.
  2. Eliminating “fossil fuel subsidies”, also deriving from the current revision’s mandatory exemption for aviation and maritime fuels. For the aviation sector, the carbon component is covered by the EU ETS. Therefore, to avoid double taxation, the ETD should exempt aviation fuel at least for its carbon content, if the ETD will be revised to include a CO2 component.

We hold the view that this revision is part of a broader set of policy reforms, namely the European Green Deal, whose main objective is environmental. Therefore, we understand the main objective of the revision of the Energy Taxation Directive to also be environmental.

Hence, we believe the main focus should be on taxing CO2, with the energy content of fuels taking a secondary role. Nonetheless, including an energy content component will help deliver on energy efficiency by encouraging lower consumption, and as such it should not be discarded.

Another important element that should be considered in the context of the revision is the risk of carbon leakage. The EU ETS addresses this risk by allocating allowances for free to sectors that are highly trade exposed. Likewise, if the ETD tax structure will be based on the carbon content, it will be necessary to find ways to address this risk. Otherwise, sectors that are not within the ETS scope but that will be subject to energy taxation will be treated unfairly vis-à- vis those covered.