Revision of the Energy Taxation Directive (ETD)

Context and Purpose of the ETD Directive

The Directive 2003/96/EC, known as the Energy Taxation Directive, is a key instrument of the European Union to harmonise excise policy on the taxation of energy products and electricity. The main objective of the revision of the Directive is to align the taxation of these products with the objectives of the EU's energy and climate policy, in order to contribute to the achievement of the Union's 2030 climate targets and to achieve climate neutrality by 2050. The revision includes an update of the scope and structure of tax rates and changes in tax exemptions and incentives to reflect the changing energy mix and technological progress.

Role of Business & Science Poland (BSP)

The BSP played an important role in the consultation process on the revision of the ETD Directive. We have made a number of key demands and recommendations aimed at ensuring a stable and predictable regulatory framework for businesses and investors.

The main postulates of the BSP:

1. Exemptions from excise duty for energy in the ETS:
   • The BSP stressed the need to maintain excise duty exemptions for electricity used in installations covered by the Emissions Trading Scheme (ETS), which aims to support companies in the energy transition.

2. Exemptions for Specialized Industrial Processes:
   • It was proposed to maintain exemptions for electricity used for chemical reduction purposes and in electrolytic and metallurgical processes, which is crucial for heavy industry.
3. Taxation of Alternative Fuels:
   • The BSP suggested introducing tax exemptions for low- and zero-carbon alternative fuels to support the transition to greener transport solutions.
4. Mechanism for Gradual Raising of Minimum Tax Rates:
   • It was proposed to gradually raise the minimum tax rates for fossil fuels to give the market time to adapt to the new requirements and avoid sudden increases in energy prices.
5. Differentiation of Taxation on the Basis of GDP and Purchasing Power:
   • The BSP highlighted the need to link minimum tax rates to GDP and the purchasing power of individual Member States in order to avoid undue burdens on less affluent countries.
6. Taxation of the Aviation Sector:
   • BSP argued that the imposition of a tax on kerosene could undermine the competitiveness of European carriers in the global market and slow down the development of the aviation sector in the EU. It was suggested that any tax instrument introduced should take into account the saturation of the market and the scale of the carriers' activities.

Current Status of Work on the ETD Directive

Work on the revision of the ETD Directive continues under the current EU institutional mandate, due to the lack of unanimity among Member States on the negotiated rules.

Key Elements of Discussion

1. Minimum Levels of Taxation:
   • Discussions focus on establishing minimum levels of taxation of energy products to be aligned with EU energy and climate policy objectives.
2. Abolition of Exemptions for the Aviation and Maritime Transport Sector:
   • The abolition of certain tax exemptions for the aviation and maritime transport sector is being considered in order to increase compliance with the EU's climate objectives.
3. Taxation of Electricity:
   • It is proposed to introduce the possibility of taxing electricity used for transport by rail and public transport, with the aim of increasing the budgetary revenues of the Member States.

Summary

The revision of the ETD Directive is a key step towards aligning energy taxation policy with the EU's climate and energy objectives. Thanks to the active involvement of the BSP, a number of important proposals have been taken into account to ensure stable and predictable regulatory conditions for businesses, support the energy transition and avoid excessive burdens on less affluent Member States. Continued work on the Directive will be crucial for the future of EU energy and climate policy.

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