Reform of the Energy Taxation Directive under the Green Deal
Key points of the Green Deal On June 28, 2021, the European Union adopted new climate targets for the years 2030 (reduction of CO2 emissions by 55 %) and 2050 (EU-wide carbon neutrality). These stricter climate targets are associated with significant competitive disadvantages for German companies in an international comparison. To ensure that environmentally friendly production in Europe does not migrate to third countries or that international air and sea transport is not increasingly carried out by non-European companies, higher targets must be backed up by stronger protection against the relocation of CO 2 emissions to third countries (carbon leakage protection) – at least until comparable prices become binding worldwide. In addition, the central task of politics is to make climate-neutral alternatives marketable. This requires a stable and investment-friendly regulatory framework. To implement the climate targets, the EU Commission presented a legislative package called "Fitfor-55 climate action package" on 14 July 2021. This package aims to set a more ambitious regulatory framework for numerous areas - including a reform of the European emissions trading system, the introduction of a carbon border adjustment mechanism, a burden sharing between member states and the revision of the EU Energy Taxation Directive. Among numerous other measures, the Fit-for-55 package contains the following key elements: ▪ First, the existing European emissions trading system will be aligned with the new climate targets (more ambitious reduction targets, reducing the amount of free allowances, and a onetime lowering of the cap on emissions) ▪
Furthermore, the EU Commission is planning to expand the European emissions trading system by including a separate system for the transport and building sectors. These two components are intended to form the basis for pricing energy sources based on carbon in order to align regulation with climate targets.
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In addition, the EU Energy Taxation Directive is to be amended. In the future, a new structure of tax rates for fuels and electricity is to be introduces which will be based on the energy content and environmental performance. The alternative of focusing on carbon content would have been advantageous in that sense as there would have been no need for a new system for the buildings and transport sectors and that the climate targets could have been implemented in the existing energy taxation system.
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