Europe’s vitality taxes are worsening trade woes, energy CEO says

By Kate Abnett and Julia Payne

BRUSSELS (Reuters) – Governments attempting to find methods to assist Europe’s struggling industries ought to take purpose on the continent’s excessive vitality taxes, that are eroding competitiveness, the pinnacle of Europe’s electrical energy foyer instructed Reuters.

The European Union is drafting a bundle of measures to help flagging industries, due early subsequent 12 months, as manufacturing giants from automakers to metal companies warn of plant closures and 1000’s of job losses.

Leonhard Birnbaum, President of trade group Eurelectric, stated the woes of Europe’s energy-intensive industries are many, together with a extra fragmented market than China and tough entry to credit score – however that policymakers in search of to supply quick aid ought to “rip out” from vitality costs any prices unrelated to the trade’s construction.

“We recognize that states all the time want extra money, however in case you actually wish to electrify then you may’t have, for instance, an over-proportional tax burden on electrical energy in comparison with the tax burden on fuel,” Birnbaum, who can be the CEO of German utility E.ON, instructed Reuters in an interview.

“If we’re severe about value competitiveness, if we’re severe about electrifying, if we’re severe about decarbonising, I feel we have to act on this,” he stated.

EU industries pay energy costs 2-3 instances increased than these within the U.S. Taxes made up, on common, 23% of the retail electrical energy value paid by Europe’s energy-intensive companies in 2023, evaluation by the think-tank Bruegel confirmed.

However many of those levies are imposed by nationwide governments, and outdoors of the EU’s management. Negotiations amongst EU international locations on a proposal to rejig EU tax guidelines in favour of cleaner vitality sources have been caught since 2021.

The EU will publish a plan on reasonably priced vitality costs early subsequent 12 months. However with the tax modifications caught, and a latest EU energy market reform nonetheless being launched by nationwide governments, some diplomats questioned what else Brussels can supply.

A senior official from one EU nation stated slicing taxes would offer solely “restricted” assist, and broader measures had been wanted to assist European industries compete with China – for instance, EU guidelines requiring public procurement to purchase locally-made, greener merchandise.

“We’ve commerce coverage instruments, now we have competitors coverage instruments… We have to see a bigger context,” the senior official stated.

Wholesale energy costs in Europe final month climbed to their highest ranges in over a 12 months, though they continue to be far beneath their peak in 2022, after Russia invaded Ukraine and slashed fuel deliveries to the EU.