Energy taxation can support efforts to combat climate change, but current tax levels do not reflect the extent to which different energy sources pollute. A review published today by the European Court of Auditors outlines how energy taxes, carbon pricing and energy subsidies contribute to achieving the EU’s climate objectives. Even though renewable-energy subsidies almost quadrupled over the 2008-2019 period, 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. The auditors point to challenges faced by policymakers: ensuring consistent energy taxation across sectors and energy carriers, reducing fossil-fuel subsidies, and reconciling climate objectives with social needs.

“Energy taxation, carbon pricing and energy subsidies are important tools for achieving climate goals. The main challenge, in our opinion, is how we strengthen the links between regulatory and financial measures and find the right mix between these two”, said Viorel Ştefan, the member of the European Court of Auditors responsible for the review. “With our review, we aim to contribute to the discussion on energy prices and climate change, and in particular to the upcoming debate around the proposed revision of the Energy Taxation Directive”.