Germany says EU tax plan on electricity threatens national sovereignty — The Debate
Berlin warns a draft EU rule could bypass unanimity and limit German fiscal control.
Berlin warns that a draft EU rule on electricity taxation could be passed by qualified majority voting, bypassing the unanimity normally required for tax matters. European Commission is seeking to introduce significant tax provisions through a legal instrument that could be adopted by qualified majority, rather than the unanimity traditionally required for EU tax measures, as Brussels races to electrify its industry, transport and energy sectors amid high electricity prices.
"I have significant doubts that (the proposal) ... can be adopted by a qualified majority. (It) is contrary to the unanimity requirement in tax law ... it makes substantial tax‑related provisions and directly interferes with national tax and budgetary sovereignty," reads the letter signed by Bastian Fleig, Director General at the German Ministry of Finance.
The issue is especially sensitive because the EU is pushing to accelerate electrification, having set a 46% target by 2040 in a bid to ditch imported fossil fuels. Energy Commissioner Dan Jørgensen said the bloc has spent over €22 billion in the 48 days following the war in the Middle East without buying new energy.
Uncertainty over the future of the Strait of Hormuz, the critical waterway, is giving Brussels further impetus to pursue electrification and reduce the bloc's reliance on imported fossil fuels.
Electricity remains significantly more expensive than fossil gas across the EU, often three to five times higher, making the switch to clean technologies harder for households and businesses.
Germany argues that the Commission should not use the electricity market design law to reopen the compromise reached under the Energy Tax Directive, which gave governments leeway to decide how electricity is taxed.
The new proposal would, in Germany's view, re‑introduce an environmental ranking of energy carriers through a back door, a move that could set a precedent for future EU tax measures and affect financing of the green transition across the bloc.
While the German objection highlights a clash between EU‑wide electrification ambitions and national fiscal sovereignty, Berlin stresses that it shares the overall goal of transformation and electrification, only disputing the Commission's chosen vehicle.
"We all share the goal of transformation and electrification. I do not share the approach of the European Commission," the letter states.
For Berlin, the solution is to drop the proposal to tax gas higher than electricity within the electricity market design law and to negotiate electricity taxation under the proper EU law, the Energy Tax Directive.
Tom Lewis, energy policy coordinator at the NGO Climate Action Network Europe, said Germany should back the Commission's plan to reform energy taxation and help close the price gap between electricity and gas.
In the EU, Finland and Sweden are notable exceptions that already tax gas at higher rates than electricity, underscoring divergent national approaches within the single market.
Saverio Papa, head of energy at the European Heat Pump Association, noted that both energy taxation and network charges are key factors driving the high electricity‑to‑gas price ratios in Europe.
Commission figures show that grid charges and taxes together often outweigh the price of the electricity consumed. Network charges accounted for 27% of household electricity bills and 21% of business bills, while national taxes and levies added another 24% for households and 16% for firms.
The EU co‑legislators, the European Parliament and the Council, are set to start negotiations on the file after the summer break, under the Irish EU Presidency.