Solar project developers in Europe will have taken note as more details emerged about two crucial policy developments related to the EU's desire to apply its European Green Deal principles to the energy sector.
The European commissioner for economy, Paolo Gentiloni, on Thursday held a press conference about the EU's proposed carbon border adjustment mechanism (CBAM) – which would levy charges on non-EU products in relation to their embedded carbon footprint – and about a planned revision of the taxes applied to energy generation.
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Commissioner Gentiloni said the long-trailed CBAM would initially require importers of goods into the EU to report on the embedded carbon footprint of the products in question, from 2023-25, without having to pay any associated cost. Importers would, however, have to purchase certificates to offset the carbon represented by the imported goods from 2026 onwards, under the European Commission proposal, with the weekly prices of the carbon allowances set by a beefed-up EU emissions trading scheme.
The commissioner dismissed claims the CBAM would amount to protectionism by indicating the regime would be specifically linked to individual imported goods rather than to their countries of origin.
Commenting on the fact electricity is taxed by volume, without regard to the sustainability or otherwise of the power or the fuel used, Commissioner Gentiloni said the rates “do not reflect the actual energy content or environmental performance of the energy sources covered. They lead to pollutant fuels being taxed less than their cleaner alternatives, which of course makes no sense. In short, the current rules are completely out of synch with our green ambitions.”
Under the proposed reform of the directive, a new tax regime would set minimum taxation rates for different types of electricity generation and fuel use, reflecting environmental performance and energy efficiency. It would then be down to EU member states to tax the most environmentally harmful fuels the most, said Gentiloni, with exemptions to the minimum rates only available to the most sustainable sources of energy.
The new regime would list more energy products and uses which have emerged since 2003 and the commissioner said the mandatory exemption from taxation of kerosene in aviation, and of oil used in shipping, would be lifted, with sustainable alternatives in both sectors to instead be exempted from tax for ten years.
Gentiloni said the proposed taxation reform would give member states “in-built possibilities” to mitigate any resulting rise in costs for lower-income households.
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