A large and adverse increase in taxation on natural gas as an engine fuel has become unlikely after a split between EU Member States on the proposed Energy Taxation Directive that aimed to introduce a flat tax on all engine fuels by 2018. The EU-Commission will now consider withdrawal of the Directive, as all matters concerning taxation in the EU require unanimity.
NGVA Europe would welcome a withdrawal of the Directive, says Secretary General Lennart Pilskog, as “natural gas and bio-methane would have been extremely heavily punished as the cleanest fuels. Europe needs a smarter way to promote more sustainable mobility”. Tax on natural gas is much lower than other fuels at the moment. Under the Commission's proposal, natural gas would have been subjected to the same tax rate per tonne of CO2 as petrol, diesel and other fuels. Natural gas however has lower emissions than other fossil fuels.
Applying the higher tax rate would have put natural gas, which is still in development as an alternative to the conventional fuels, at a serious disadvantage, possibly killing off the market completely.
Average EU tax levels on (left to right) diesel, kerosene, petrol, LPG, natural gas.
A higher tax on natural gas risks killing off its market (NGVA/Eurogas)
According to recently adopted EU-Directive on the deployment of alternative fuels infrastructure, EU Member States now need to develop a comprehensive network of CNG and LNG refuelling infrastructure by 2020 and 2025 respectively. Europe needs to provide stability and confidence to investors in natural gas infrastructure and users of natural gas vehicles, in order to achieve its objectives.
The EU Ministers of Finance were asked to give their opinion, last month during a Council meeting on 23 October, on a revised proposal of the Directive. Both the UK and Germany rejected it outright, stressing that further deliberations on the Directive would be fruitless as far as they were concerned. They were supported by Latvia, Slovenia and Belgium.
France spoke out in support, arguing it would be a pity to stop after all the energy put into the discussions. It was supported by Sweden, which said there were some ‘important concepts’ in the Directive, and Denmark. Other countries that spoke in favour of continuing working on the Directive were Portugal and Spain, the latter arguing the results were going ‘in the right direction’. Finland also supports the Directive but rejected the revised Italian proposal, saying it was ‘watered down’ too much and that it preferred the much more rigorous original proposal of the European Commission.
Source: NGVA Europe
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