Energy Taxation at European Level: What does it do for the Environment and Sustainability?

Abstract

After an overview on the history of attempts to introduce an energy tax at European level, this article discusses how successful the current Energy Tax Directive is in respect of its environmental and sustainability objectives. Although the primary focus has been the proper functioning of the internal market, a reference to the EC Treaty requires it to integrate environmental protection requirements with a view to promote sustainable development. This article focuses primarily on the shortcomings of the Directive by discussing the tax treatment of the energy-intensive and cement industries and the transport and agricultural sectors, respectively, as well as the use of gas oil and heat and the derogations present in it. This article then turns to the new and long-awaited proposal from the Commission, adopted on 13 April 2011, and analyses to what extent the proposal remedies these 'shortcomings', and it discusses some of the new features that are supposed to bring the Directive more in line with the European Union (EU)'s energy and climate change objectives.