European Court of Auditors criticizes fossil fuels subsidies

Energy taxes could help combat climate change, but current tax rates do not reflect the extent of pollution from different energy sources, according to an analysis by the European Court of Auditors. The amount of subsidies for renewable energy nearly quadrupled between 2008 and 2019. At the same time, however, »fossil fuel subsidies have remained relatively stable over the past decade,« despite commitments by the European Commission and some member states to phase them out by 2025. It is a political challenge to »ensure coherent energy taxation across all sectors and energy sources, phase out fossil fuel subsidies, and socially cushion the achievement of climate targets«.
According to Viorel Stefan, European Court of Auditors member in charge of analysis, »the main challenge is to link regulatory and financial measures more closely and find the right mix of the two elements«. Energy taxes, CO2 prices and energy subsidies are important tools for achieving climate goals, he said.
The current energy taxation directive, which sets minimum tax levels for energy products and sectors, allows, however, energy sources that are more polluting to be treated more favorably in terms of taxation 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 the European Commission had already proposed in 2013 a shift in the tax burden from labor to pollution by 2020 to support sustainable resource use. In practice, however, the report said, the share of environmental taxes in total tax revenue has not increased since 2016, and has actually fallen slightly.
With low CO2 prices and energy taxes, as well as fossil fuel subsidies, the relative costs of greener technologies were rising and the energy transition was being delayed, the auditors said. As many as 15 member states subsidized fossil fuels more than renewables.
The Court of Auditors explicitly states that the publication is not an audit report, but an analysis for the period from 2008 to July 2021.
The European Court of Auditors' report »Energy taxation, carbon pricing and energy subsidies« is available free of charge as a PDF (52 pages, see link below).

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