Review 01/2022: Energy taxation, carbon pricing and energy subsidies

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This report assesses how energy taxes, carbon pricing and energy subsidies fit with EU climate objectives. Energy taxation can support climate efforts, but current tax levels do not reflect the extent to which different energy sources pollute. Renewable energy subsidies have almost quadrupled over 2008-2019, while fossil fuels subsidies have remained stable. Fifteen Member States spend more on fossil fuel than on renewable energy subsidies. In mid-2021, the Commission published a proposal to revise the Energy Taxation Directive. Our report outlines challenges faced by policymakers when updating energy taxation and subsidies policies: ensuring energy taxation consistency across sectors and energy carriers; reducing fossil fuel subsidies, and reconciling climate objectives with social needs.