Revision of Energy Taxation Directive

To the EU Commission
Jernkontoret Dnr: 17/20

Revision of Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity (Energy Taxation Directive or ‘ETD’ or ‘Directive’)

Jernkontoret, the Swedish steel producers association, welcomes the Green Deal and the holistic perspective that characterize the strategy and we also support the EU ambition to become climate neutral by 2050. Both the Commission and the Member States (MS) need to commit to a long-term policy framework with realistic objectives, and simple and clear rules to provide this stable environment. The current ETD remains effective and operational, without hampering competitiveness for business and secure access to energy and feedstock at competitive prices while supporting wider EU policy objectives.

Aligning different EU policies is a commendable ambition. Different policy areas influence each other and to reach an efficient development in line with the Green Deal the combination of regulatory measures need to be complementary. At the same time, it is important that different legislation do not overlap each other. Hence every piece of legislation shall have its well-defined purpose.

The primary objective of ETD is to support the proper functioning of the internal market by avoiding double taxation and other distortions of trade and competition between energy sources and energy consumers and suppliers. As such, ETD provides MS with a tool to tax energy and indirectly support the objectives of other legislation in energy and climate policies.

EU-ETS is the key tool for reducing CO2-emissions from power and process industry and hence these sectors shall not be subject to a CO2-tax. To fulfil other energy and climate policies, each MS has the possibility to use strategies and instruments most suited in each country. Energy and CO2-tax may be relevant and usable measures within these strategies, but other measures are also needed, such as R&D&I support, education and other incentives. The mix of strategies and instruments used to reach its climate and energy targets should still be the choice of each MS. Hence the ETD, as such, shall not have the ambition to promote e.g. emission reduction or energy efficiency.

A common EU framework is necessary for the smooth functioning of the EU energy market in order to avoid distortions on the internal market. However, minimum energy tariffs do not exist in a large part of the rest of the world where European industry have their global competitors. In order to mitigate the negative impact of energy taxation to international competitiveness, minimum tariffs shall be kept at the current level.

Companies need a stable policy environment to be able to make long-term investment decisions. This is particularly relevant in the transition to a low-carbon economy. In this context it is important that companies operating in highly competitive international markets remain out-of-scope as stated in article 2.4b of the ETD to ensure a level playing field at a global level. Similarly, the exemptions in article 17 and 15(l) concerning energy intensive industries is important to safeguard a level playing field at the EU internal market. These consistent definitions facilitate implementation and minimize costs and administrative burdens for MS and businesses and paves the way for a cost-efficient green transition.

Sectoral differentiation of tax levels is an important possibility for MS to optimize their policy framework to efficiently reach their desired targets. Therefore, the current possibility to differentiate between tax levels for industry and other sectors is important to keep. Such national differentiation should not be regarded as subsidies since its purpose is to keep a level playing field between competing sectors within the EU. We also believe that the legal basis for ETD shall continue to be article 113 of the Treaty.

To ensure greater legal certainty for companies, we would urge the Commission to ensure that any energy tax reductions or exemptions allowed by the ETD is automatically considered in line with state aid rules and fall under the General Block Exemption Regulation.