The European Union is preparing major changes to its tax policy and network charges in a bid to drastically reduce citizens’ electricity bills. The key trump card is the introduction of a rule that would require electricity to be taxed at a lower rate than gas, according to a draft European Commission document seen by Reuters.
The proposal is the EU’s direct response to the serious turmoil in energy markets caused by the war with Iran. The conflict has driven up oil and gas prices, exposing consumers to high costs due to the bloc’s long-standing dependence on imported fossil fuels.
Electricity becomes cheaper than gas: What is the goal?
The new strategy would require national governments to tax electricity more favourably than natural gas. The measure has two key objectives:
Accelerating the transition to green energy: Incentivising industry, transport and households to switch from oil and gas to electricity.
Increasing competitiveness: By reducing electricity costs, technologies such as electric cars and heat pumps will become much more economically viable for citizens.
“Rapid and decisive action is needed to reduce citizens’ bills and break the EU’s dependence on fossil fuels,” the draft document stresses.
Smart meters and cheaper off-peak tariffs
While governments will retain some autonomy in setting national tax rates, they will have to respect the new EU framework. The draft plan foresees member states introducing strong incentives for consumers, encouraging them to use electricity during the times of day when it is cheapest and when the system is least busy.
To achieve this, the EU has set an ambitious goal: at least half of consumers in the Union will receive smart meters by 2030. These devices will allow citizens to monitor consumption in real time and make the most of the cheap tariff. This is crucial considering that network fees currently swallow up as much as a quarter of the average electricity bill in the EU.
The road to the final realization of this plan will not be easy. To enter into force, the tax changes must receive the green light from MEPs, but also from a strengthened majority of member states.
Diplomatic sources are already warning of resistance from certain countries. Some member states strongly oppose voting with a strengthened majority, arguing that unanimous approval (consensus) from all countries is necessary for tax issues, fearing that such a move could set a dangerous precedent for the future.
