On July 17, the European Commission reported that electricity is taxed significantly more than natural gas across the EU. According to a study commissioned by the Commission, electricity is taxed at roughly twice the rate of natural gas in the median EU country. When considering the total tax burden, electricity costs are approximately four and a half times higher than gas for final consumers in most Member States.
Tax Disparities
The report highlights that electricity is, on average, nearly three times more expensive for companies and about two and a half times more costly for households compared to gas. This disparity has been acknowledged as a policy choice that has not been reassessed since both energy sources last competed on comparable terms. The Commission's Electrification Action Plan emphasizes that addressing this gap could significantly shift the economics of electrification without requiring new subsidies or additional generation capacity.
Industry Response
The Global Renewables Alliance, an industry coalition, has also called for governments to expedite the transition to electrification. In a public statement made in June, the coalition, which includes over 100 partner companies generating approximately $1.5 trillion in revenue, urged for faster governmental action to facilitate electrification efforts. The Commission cited this coalition as a key partner in its electrification strategy.
The higher tax rates on electricity compared to gas could lead to increased costs for energy-intensive sectors, particularly manufacturing and transportation, which rely heavily on electricity. Investors may be concerned about the impact on corporate earnings in these sectors as they adjust to the cost structure. Watch for further developments in EU energy policy, particularly any proposed changes to tax structures that could affect electrification initiatives.