Brussels, 20 April 2021

On the 20th of April, Executive Vice-President Frans Timmermans and Commissioner Paolo Gentiloni hosted an online event to present the EU’s outlook on green taxation. The event was organized in the context of the Union’s targets to tackle climate change and foster a cleaner environment and consisted of several speeches and two panel discussions.

In his opening address, the Commissioner for Economy argued that the green transition is the greatest transition by design ever attempted and will rely on innovative technologies, research and development, private and public investments, as well as behavioral changes. In this context, a review of taxation policies at national, European and global level can play a key role, especially by implementing the “polluter pays” principle. Green taxation can incentivize changes in the habits of businesses and promote a shift to more sustainable practices and production processes that will benefit all of us in the long run, especially the younger generation.

paolo gentiloni

The Commission is committed to developing a taxation framework where activities that produce high emissions must bear appropriate costs.  This principle will be at the heart of the package of proposals that the Commission will table this summer, which will include an update of the EU's rules on energy taxation. According to Mr. Gentiloni, the existing Energy Taxation Directive is not aligned with today's policy goals.

During one of the panel discussions focusing on how to devise a green taxation framework, Director-General of DG TAXUD Mr. Thomas Gerassimos stressed that subsidies to coal and fossil fuels must stop, while it should become easier to invest in renewables. Eliminating tax exemptions and rebates will therefore be a key component of the upcoming Energy Taxation Directive proposal. According to DG TAXUD’s Director-General, green taxation policies are not only beneficial as they change industry and consumer behavior for the better, but also because they allow to reduce taxation in other areas.

Executive Vice-President Timmermans used his concluding remarks to stress that the Green Deal is a cornerstone of Europe’s recovery from COVID-19 and for Europe to get back on its feet stronger and more competitive than before the pandemic.

The Commission will propose a comprehensive package of legislative changes to deliver the necessary emissions reductions from strengthening the EU ETS, to review rules on renewables and CO2 emissions, and green taxation is an important part of this picture. By altering economic incentives, taxation can drive far-reaching changes in the way we produce and consume. 

timmermans

Mr. Timmermans recalled the need to make the Energy Taxation Directive fit for the Green Deal. A review of this directive is an important part of the legislative package coming in June (Fit for 55). Energy taxation that favors fossil fuels should become a thing of the past. According to Mr. Timmermans taxation should help reduce our dependency on fossil fuels and encourage the use of clean transport and clean energy. It is time to review the tax exemptions for sectors such as maritime transport and aviation, as they are not in line with the EU climate and environmental goals.