A leaked draft of a keenly awaited Action Plan for Affordable Energy suggests cutting green levies and VAT could ease costs for European consumers β but tax reforms have been deadlocked since But with tax matters one of a handful of EU policy areas where legislation requires the unanimous backing of all 27 member state governments, reform is proving hard to achieve.
Talks in the EU council have been deadlocked for years, with countries divided notably over whether the airline and shipping industries should continue to enjoy tax-free fossil fuels. Among the proposed reforms is tax relief for low-income households. The draft cost-cutting plan β seen by Euronews and due to be published in its final form on 26 February alongside a flagship Clean Industrial Deal β promises guidance for governments on how to reduce electricity levies to the lowest possible under the current regulations.
It also looks for non-taxation approaches, for example by promoting demand reduction to reduce price spikes during times of peak electricity demand, and a market based approach to incentivize energy efficiency improvements.
One of the paradoxes during the energy crisis of was that electricity prices hit record highs even when the bulk of power in the grid was coming from renewable sources like wind and solar, which last year overtook fossil fuel-fired generation. This is due to a market mechanism where the most expensive ingredient in the mix sets the price.
Hastily introduced reforms introduced caps and empowered governments to intervene with support for consumers, but did not change the fundamental structure of the system, and the draft text suggests there are no plans to revisit the market design. By Robert Hodgson. Share this article Comments. Share this article. You might also like Energy price surge risks pushing EU economy into stagflation.
