The European Court of Auditors has criticized the continued high level of subsidies for fossil fuels by EU member states in an analysis presented Monday (Jan. 31). Energy taxes, the report says, could help combat climate change, but current tax rates do not reflect the extent of pollution from different energy sources. While it is true that the amount of subsidies for renewable energy nearly quadrupled between 2008 and 2019, »fossil-fuel subsidies have remained relatively constant over the last decade despite commitments from the European Commission and some Member States to phase them out.« Fifteen member states subsidize fossil fuels even more than renewables.
Energy taxes, CO2 prices and energy subsidies are important tools for achieving climate goals, the report says. However, the current energy taxation directive, which sets minimum tax levels for energy products and sectors, allows polluting energy sources to receive more favorable tax treatment than CO2-efficient energy sources. For example, coal is taxed lower than natural gas, and some fossil fuels are taxed significantly lower than electricity. Yet, as early as 2013, the European Commission had proposed shifting the tax burden from labor to pollution by 2020 to support sustainable resource use. In practice, however, the share of environmental taxes in total tax revenue has not increased since 2016, but has actually decreased.
With low carbon prices and energy taxes combined with fossil fuel subsidies, the report says, the relative costs of green technologies are rising and the energy transition is being delayed.