“The proposal contradicts the requirement for unanimity in tax law and directly interferes with national tax and budgetary sovereignty,” states the letter signed by Bastian Flieg, Director General at the German Ministry of Finance.
The issue is particularly sensitive as the EU seeks to accelerate electrification, setting a target of 46% by 2040 in an effort to phase out imported fossil fuels. According to Energy Commissioner Dan Jørgensen, in the 48 days since the war began in the Middle East, the EU has paid over 22 billion euros without concluding a single new energy supply deal.
The uncertainty surrounding the future of the Strait of Hormuz provides Brussels with an additional incentive to promote electrification and reduce dependence on imported fossil fuels.
At the same time, electricity in the European Union remains significantly more expensive than natural gas: its cost is often three to five times higher, which makes it difficult for households and businesses to switch to clean technologies.
Legal Loopholes
Against this backdrop, Brussels is pushing to make electricity a more attractive alternative to fossil fuels, while Germany warns: this goal should not be used as a pretext for revising the agreement reached by EU countries during negotiations on the Energy Taxation Directive.
Germany’s objections point to a potential clash between the European Commission’s desire to make electrification financially attractive and the member states’ determination to retain control over taxation.
Tom Lewis, energy policy coordinator at the NGO Climate Action Network Europe, stated that Germany should support the Commission’s proposal to reform energy taxation in order to narrow the price gap between electricity and gas.
“Today, the average German household pays more than three times as much per unit of electricity as it does for gas, which makes electrification—such as the installation of heat pumps—less attractive than polluting gas boilers,” Euronews quoted Lewis as saying.
The EU’s co-legislators—the European Parliament and the Council—intend to begin negotiations on this sensitive issue after the summer recess.
