High energy taxes are eroding the competitiveness of Europe’s industries, Leonhard Birnbaum, President of the industry group Eurelectric told Reuters.
The European Union is drafting a package of measures to support struggling industries, but Birnbaum said the government should take aim at the high energy taxes.
The measures to support industries are due early next year as automakers to steel firms warned of plant closures and job losses.
The head of Europe’s electricity lobby told Reuters that the woes of the continent’s energy-intensive industries are many, including a more fragmented market than China and difficult access to credit.
“We appreciate that states always need more money, but if you want to electrify then you can’t have, for example, an over-proportional tax burden on electricity compared to the tax burden on gas,” Birnbaum, who is also the CEO of German utility E.ON, told Reuters.
Reuters quoted Birnbaum as saying in a report:
If we are serious about cost competitiveness, if we’re serious about electrifying, if we’re serious about decarbonising, I think we need to act on this.
EU industries pay more power prices
Industries in the EU have to pay power prices, which are two to three times higher than those in the US, according to the report.
An analysis by the think-tank Bruegel showed that taxes made up, on average, 23% of the retail electricity price paid by industries in Europe during 2023, which are energy-intensive
However, many of these taxes were imposed by national governments, and outside of the EU’s control, Reuters reported.
Negotiations among EU countries on a proposal to rejig EU tax rules in favor of cleaner energy sources have been stuck since 2021.
According to the report, the EU will publish a plan on affordable energy prices next year.
‘Limited’ help?
However, diplomats questioned what more Brussels can offer, with tax changes stalled and a recent EU power market reform still being introduced by national governments.
A senior official from one EU country told Reuters that cutting taxes would provide only “limited” help, and broader measures were needed to help European industries compete with China.
For instance, rules in the EU require public procurement to buy locally-made, greener products.
“We have trade policy tools, we have competition policy tools…We need to see a larger context,” the senior official was quoted as saying in the Reuters report.
Wholesale power prices hit their highest levels in over a year in Europe last month.
However, prices remained significantly below the peak reached in 2022 after Russia invaded Ukraine and trimmed deliveries of natural gas to the EU.
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