Content updated 9 March 2023

EU Energy Taxation Directive

The EU’s Energy Taxation Directive (ETD) entered into force in 2003 and sets structural rules and minimum excise duty rates for the taxation of energy products used as motor fuel, heating fuel, and electricity.

In July 2021, the Commission adopted a proposal for a revision of the Energy Taxation Directive to reflect the EU’s commitments under the ‘Fit for 55’ package .

As long as those minimum rates are respected, Member States are free to set their own rates. However, most of them tax most energy products and, in some cases electricity, above the ETD minimum rates.

While the ETD is a tax on output fuels/energy content for all sectors of the economy, across industry, transport and households, the ETS limits greenhouse gas emissions in the sectors it covers and puts a price on these emissions (link to the eceee web page on EU ETS).

Revision of Energy Taxation Directive

The aim of the revision is to align the taxation of energy products with EU energy and climate policies, promote clean technologies, remove outdated exemptions and reduced rates.

The main changes include:

  • Fuels will be taxed according to their energy content and environmental performance rather than their volume. Conventional fossil fuels, such as gas, oil and petrol, will be taxed at the highest rate and electricity at the lowest rate.
  • Exemptions for certain products and home heating will be phased out. Fossil fuels can no longer be taxed below minimum rates.
  • Fossil fuels used as fuel for intra-EU air transport, maritime transport and fishing will no longer be fully exempt from energy taxation. Taxation in these areas will complement other measures under the EU ETS and in the EU Refuel initiatives.
  • The new system aims to tax the most polluting fuels the highest. Member States must ensure this ranking is replicated domestically.
  • The proposal includes the possibility for Member States to exempt vulnerable and energy poor households from taxation on the supply of heating fuels and electricity.
  • Regarding the taxable base, the scope will be enlarged to include energy products or uses that had previously escaped the EU's energy taxation framework, such as mineralogical processes. 

The proposal also broadens the taxable base by including more products in the scope and by removing some of the current exemptions and reductions.