Main elements in a possible revision of the Energy Taxation Directive Informal meeting with stakeholders, 15 July 2009 European Commission, DG Taxation and Customs Union Unit D.2 Excise Duties and Transport, Environment and Energy Taxes The views expressed in this presentation may not in any circumstances be regarded as stating an official position of the European Commission. All reference to possible future tax rates are purely indicative and non-binding, they only represent internal technical considerations of TAXUD. European Commission / Taxation and Customs Union

2 Summary 1.Shortcomings in the Energy Taxation Directive 2.Main elements in a possible revision of the ETD 3.Rates structure and level European Commission / Taxation and Customs Union

3 ETD current shortcomings (1) European Commission / Taxation and Customs Union

4 ETD current shortcomings (2) European Commission / Taxation and Customs Union

5 ETD current shortcomings (3) European Commission / Taxation and Customs Union

6 ETD current shortcomings (4) European Commission / Taxation and Customs Union

7 Summary 2.Main elements in a possible revision of the ETD 1.Distinction between taxation linked to CO2-emissions and other forms of energy taxation. 2.Consistent treatment of all energy sources 3.Framework for CO2 taxation as complement to the EU emission trading scheme 4.Additional elements European Commission / Taxation and Customs Union

8 1. Distinction energy/CO2 taxation Why? –Different policy objectives behind energy taxes (revenue generation, energy efficiency, CO2 emission reductions), –Different requirements on the level of the tax and its scope. Why “energy taxation” energy content based? –Neutral, non-distortive basis, allows for combinations with differentiated taxes without interference European Commission / Taxation and Customs Union

9 1. Distinction energy/CO2 taxation (con’t) Distinction between taxation linked to CO2-emissions and other forms of energy taxation –Two sets of minimum levels of taxation –New rules for calculation of the rates –No changes to tax procedures and tax collection rules –Existing tax differentiation maintained Motor fuel uses vs. heating uses Business use vs. non-business use European Commission / Taxation and Customs Union

10 2. Consistent treatment of energy sources Guidance on energy content: Directive 2006/32 (end-use energy efficiency) or Directive 2009/28 (new Renewables Directive) –The same tax treatment for competing energy sources Conventional motor fuels (petrol, diesel and biofuels for private use) Alternative motor fuels (niche products: LPG, CNG, 2 nd generation biofuels) Heating materials Electricity Guidance on CO2 emission factors at the end use: Commission decision 2007/589 Own tax treatment for renewable energies –Taxation taking into account their different energy content –Taxation taking into account their different CO2 emissions European Commission / Taxation and Customs Union

11 3. CO2-related taxation to complement EU ETS Minimum framework for national CO2 taxes Adaptation to the ETS Directive –Framework to cover gaps and to avoid overlaps –Allows quantifying what is the CO2-realted element in energy taxation Different scope as current energy taxation –All uses of energy not included in the EU ETS (beyond motor fuel and heating fuel use) –No overlaps with EU ETS (practical technique: exemption from CO2-related taxation for ETS installations) European Commission / Taxation and Customs Union

12 3. CO2-related taxation to complement EU ETS (con’t) Guidance on the level of CO2-related minima –Minimum additional costs that can be expected to arise for each Member State in the light of Decision 406/2009 on each Member States effort to reduce greenhouse gas emissions by 2020 Taxation related to CO2 emissions and biomass –Natural advantage (until positive CO2 emission factors are eventually established) CO2-related taxation - subject to flexible options in the ETD –e.g. Article 5, 17, reduced rates for business use, alternative instruments instead of a CO2 tax (provided that equivalent effect). European Commission / Taxation and Customs Union

13 4. Other elements Consistent treatment of all energy sources –petrol and diesel for private use –alternative motor fuels (CNG, LPG, 2 nd generation biofuels), deletion of Article 15(1)(i) –deletion of Article 15(1)(l). Consistent treatment of all energy consumers –Private consumers Optional for MS to decide whether to tax households heating or not, provided that no distinctions between energy sources revision of Article 9(2) and zero minima for some heating sources –Level playing field for business consumers revision of Article 9(2) and zero minima for some heating sources (consistent minimum levels of taxation for all energy sources) revision of the tax treatment of the primary sector European Commission / Taxation and Customs Union

14 Summary 3.Rates structure and level 1.Methodology for new calculation of rates 2.How could possible future minimum rates compare to the current situation? European Commission / Taxation and Customs Union

15 Energy sources Current units Directive 2003/96/EC Energy content Directive 2006/32/EC NCV (GJ/1000 units) Energy content Directive 2009/28/EC on the promotion of the use of energy from renewable sources (MJ/l) Emission factors Commission Decision 2007/589/EC (tCO2/TJ) Emission factors corresponding to the units set in ETD (tCO2) Unleaded petrol 1000 l Gas oil1000 l LPG1000 kg Natural gasGJ Kerosene1000 l Coal and cokeGJ ElectricityMWh Bioethanol1000 l-2100 Biodiesel1000 l nd generation biofuels 1000 l-3400 Rate structure and level Conversion factors used for the energy and CO2 emissions

16 Energy sources Possible new minima according to the energy content in GJ and in ETD unit Possible new minima per tonne CO2 and in ETD units Possible new minima total per ETD units Current minima Motor fuels Unleaded petrol € 8.9 GJ €291/1000 l € 30 t/CO2 €68/1000 l €359/1000 l Gas oil€ 8.9 GJ €332/1000 l € 30 t/CO2 €82/1000 l €414 /1000 l€ 302/ l Commercial gas oil € 6.8 GJ €252/1000 l € 30 t/CO2 €82/1000 l €334 /1000 l€ 302/ l LPG€ 0.8 GJ €39/1000 kg € 30 t/CO2 €87/1000 kg €126/1000 kg€125/1000 kg CNG€ 0.8 GJ€ 30 t/CO2€2.5 GJ€2.6 GJ Bioethanol Biodiesel € 8.9 GJ0€359/1000 l Rate structure and level

17 Energy sources Possible new minima according to the energy content in GJ and in ETD unit Possible new minima per tonne CO2 and in ETD units Possible new minima total per ETD units Current minima Biofuels Bioethanol€ 8.9 GJ0 € 17 GJ €359/1000 l Biodiesel€ 8.9 GJ0 € 9/10 GJ € 302/ l 2-nd generation biofuels € 1.0 GJ0 € 8.8 GJ € 302/ l Rate structure and level

18 Rate structure and level

19 Rate structure and level

20 Rate structure and level

21 Energy sources Possible new minima according to the energy content in GJ and in ETD unit Possible new minima per tonne CO2 and in ETD units Possible new minima total per ETD units Current minima HEATING- non business use Gas oil € 0.3 GJ €11/1000 l € 10 t/CO2 €27.4/1000 l €38.5/1000 l€21/1000 l LPG € 0.3 GJ €14/1000 kg € 10 t/CO2 €29/1000 l 43 €/1000 kg0 Natural gas € 0.3 GJ€ 10 t/CO2 € 0.6 GJ € 0.9 GJ€0.3 GJ Kerosene € 0.3 GJ €10.6/1000 l € 10 t/CO2 €25.5/1000 l €36/1000 l0 Coal and coke € 0.3 GJ€ 10 t/CO2 €0.9/1000 GJ €1.2 GJ€0.3 GJ Rate structure and level

22 Energy sources Possible new minima according to the energy content in GJ and in ETD unit Possible new minima per tonne CO2 and in ETD units Possible new minima total per ETD units Current minima HEATING- business use Gas oil € 0.15 GJ €5.6/1000 l € 10 t/CO2 €27.4/1000 l €33/1000 l€21/1000 l LPG € 0.15 GJ €7/1000 kg € 10 t/CO2 €29/1000 l 36 €/1000 kg0 Natural gas € 0.15 GJ€ 10 t/CO2 € 0.6 GJ € 0.7 GJ€0.15 GJ Kerosene € 0.15 GJ €5.2/1000 l € 10 t/CO2 €25/1000 l €30/1000 l0 Coal and coke € 0.15 GJ€ 10 t/CO2 €0.9/1000 GJ €1.1 GJ€0.15 GJ Rate structure and level

23 Rate structure and level