What is Energy Taxation & ETS?
In October 2003, the EU set out to define a number of rules surrounding the taxation of energy products through the Energy Taxation Directive. These energy products include electricity, motor fuels, heating fuels and more. After evaluating the Directive in September 2019, the EC concluded that the current rules do not contribute to the new EU regulatory framework and policy objectives in the area of climate and energy. The evaluation concludes that overlaps, gaps and inconsistencies significantly hamper EU objectives in the field of energy, environment, climate change and transport. To align taxation of energy products and electricity with EU energy and climate policies, to contribute to the EU 2030 energy targets and climate neutrality by 2050, the EC is revising the Energy Taxation Directive in the framework of the “Fit for 55 package” in June 2021.
To achieve a climate-neutral EU by 2050 and the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030, the Commission is proposing to revise and possibly expand the scope of the EU ETS to transport and the building (heating) sector.
The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. A robust carbon price also promotes investment in clean, low-carbon technologies.
Why is it important for HPs?
The sectors and gases currently covered by the EU ETS are CO2 from power and heat generation, energy intensive industry and commercial aviation.
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