EU Court of Auditors calls for more tax on fossil fuels

The current management is not good. The tax policies of Europeans “do not fit with their climate objectives”, estimates the Court of Auditors of the European Union, Monday, January 31. “While subsidies for renewable energies almost quadrupled between 2008 and 2019, those for fossil fuels have remained relatively stable, despite the commitment of the European Commission and certain Member States to phase them out”, observe the authors of the report.

The EU aims to reduce its carbon emissions by 55% by 2030 compared to 1990, but coal remains on average less taxed than natural gas and fossil fuels are sometimes “considerably less taxed than electricity”. And some countries, regrets the Court, maintain taxes on fuels “at a level close to the established minima” by European regulations. Above all, the fossil fuel subsidies granted by the Member States represented between 55 and 58 billion euros per year between 2008 and 2019, of which around two-thirds were tax exemptions.

Fifteen countries – including Finland, Ireland, France and Belgium – fund more subsidies for fossil fuels than for renewables. Conversely, Germany, the Czech Republic, Spain and Italy favor renewables more than fossil fuels.

These fossil fuel subsidies (tax credits or reductions, income support, price support, direct transfers, etc.) benefit energy suppliers, manufacturers, the transport sector, farmers, and households directly. But it can “to slow down the energy transition”, contribute to affect public health – with the maintenance of emissions – and “increase the risks of investment ‘foreclosure'” in polluting infrastructures. In short, deplores the Court, this taxation “makes clean energy and low-energy technologies relatively more expensive”.

The subject is sensitive, in the midst of an energy crisis which has seen the prices of gas and electricity soar. “The gradual elimination of fossil fuel subsidies by 2025, a commitment made by the Commission and the States, promises to be delicate on the economic and social levels”, notes the report. “The repercussions of energy taxation can lead to the rejection of these taxes”. Thus, in some countries, the budget devoted to energy (including heating and transport) by the poorest households can represent more than 20% of their income. The institution therefore recommends “tax reduction” on other expenditure by households and redistributive measures” in their favor.