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Commission backs electricity tax reduction

BELGIUM: The European Heat Pump Association (EHPA) has applauded the European Commission’s recommendation for member states to reduce electricity taxation.

The Citizens’ Energy Package unveiled by the Commission, yesterday, aims to reduce energy bills and tackle energy poverty in EU countries. The package includes support for EU countries to reduce electricity taxes and levies for households, which currently account for 25% of household electricity prices, on average.

“The electricity-to gas price imbalance has long needed fixing, and it is great that the European Commission now says so,” commented EHPA policy director Jozefien Vanbecelaere. “Taxing electricity many times more than gas makes little sense when Europe wants energy that is reliable, clean, home-grown and competitive. It is now crucial that member states act to make electricity the obvious and affordable choice for households.” 

In the report, the Commission reassures member states that they already have the power to change. “Under the existing energy taxation directive and VAT directive, member states have the flexibility to lower minimum excise duty rates and VAT on electricity prices,” the report states. “This would have an immediate effect on electricity prices and contribute also to faster electrification of end-uses.”

The Commission estimates that this could reduce household electricity bills by up to 14%, or around €200 per year on average. 

The EHPA has long called for the electricity price to be no more than twice that of gas to make heat pumps competitive. It recently published a report that showed countries which tax electricity more heavily than gas see slower adoption of heat pumps and remain more dependent on fossil fuels.

“The safest way to obtain affordable energy is to rely on clean energy that Europe can produce for itself,” the report states. “This is why Europeans need to be empowered to switch from gas to cleaner alternatives based on electricity. Electrification will bring lower and more stable prices over time while increasing European independence, sustainability and competitiveness. Member states have a role to play here by setting the right targeted incentives – for instance, making the use of electricity more attractive through tax incentives and lower levies.”

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