Why EU plans to lower taxes on clean energy
What's the story
The European Union (EU) is preparing to unveil a new regulation next month, aimed at reducing taxes on renewable energy and enhancing the flexibility of electricity systems. The move comes as high energy costs continue to burden the region's economy. The proposal includes lowering excise taxes on electricity compared to natural gas and targeted tax reductions for energy-intensive industries.
Strategic shift
Transitioning from fossil fuels to renewable energy
The EU's executive arm has acknowledged that rising energy costs are not just due to high and volatile prices, but also increasing system costs. The proposed regulation is part of the bloc's strategy to transition from oil and gas to homegrown, renewable energy sources. Despite an increase in wind and solar power usage, fossil fuels still account for 57% of the region's energy consumption.
Implementation
Power taxation reduction for energy-intensive industries
The upcoming proposal will be revealed alongside an electrification strategy for the EU, which has the world's most interconnected grid but requires massive investments to modernize it. The plan also includes a targeted option to reduce power taxation for energy-intensive industries. These sectors have long warned that high energy bills threaten their investment plans in the region and could lead to plant closures.