The European Commission has recently adopted a package of proposals to make its member countries’ government policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. This is part of the EU’s ambitious European Green Deal, which aims to make Europe the first climate-neutral continent by 2050.

In relation to tax policy, the proposed measures include:

  • Revising the EU’s Energy Taxation Directive to align the taxation of energy products with its energy and climate policies, promoting clean technologies and removing outdated exemptions and reduced rates that currently encourage the use of fossil fuels. The new rules aim at reducing the harmful effects of energy tax competition, helping secure revenues for Member States from green taxes, which are less detrimental to growth than taxes on labour.
  • Adopting a new Carbon Border Adjustment Mechanism, which will initially apply to imports of cement, iron, steel, aluminium, fertilisers and electricity. The measure is to ensure that ambitious climate action in Europe does not lead to ‘carbon leakage’.

Further information available here.


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