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The European Commission (EC) is considering taxing fossil fuels and crop-based biofuels in the same way, according to a report by EURACTIV.

The European Union (EU) executive recently proposed the revision of the 2003 Energy Taxation Directive (ETD), which currently did not take into account the environmental performance of energy products, the 10 February report said.

“For example, there is no link in the ETD between the minimum tax rates of fuels and their energy content or environmental impact. The rules have also failed to keep pace with the development of new and alternative fuels such as biofuels and hydrogen,” an EU official told EURACTIV.

The official, who spoke on condition of anonymity, added that the real value of the ETD minimum rates had eroded over time and a complex patchwork of exemptions and reductions had proliferated across the bloc, leading to a “distortion across the single market”.

The current legislation has resulted in a tax anomaly particularly in the Visegrad region (Czech Republic, Hungary, Poland and Slovakia), where biodiesel and bioethanol are taxed higher than diesel and petrol respectively, according to data from biofuels associations.

In all Visegrad countries, the highest excise tax had been on bioethanol, the report said. In practice, this meant that the goal of transport decarbonisation was fading away as fossil fuels were prevailing due to lower taxation while cleaner energies were side-lined.

However, the EU official said the new system would ensure that the “most polluting fuels are taxed the highest”.

According to the new proposal, the lowest minimum rate of €0.15/GJ (US$0.17/GJ) would apply to electricity, low-carbon fuels, renewable fuels of non-biological origin and advanced sustainable products (such as sustainable biofuels, bio-liquids and bio-gas) and others.

The next lowest category would be that of sustainable, but not advanced products (such as biofuels, bio-liquids and bio-gas) with a tax rate of €5.38/GJ (US$6.01/GJ).

Conventional fossil fuels, such as gas oil and petrol, would have the highest minimum rate, the report said.

The new system was considered complex particularly in the case of determining biofuels, EURACTIV wrote.

Asked what the difference was between “sustainable food and feed crop biofuels” and “sustainable biofuels”, a source familiar with the matter told EURACTIV that sustainable biofuels were all biofuels that met the sustainability and greenhouse gas saving criteria.

The source explained that the category of “sustainable food and feed crop biofuels covers only those biofuels produced from food and feed crops which comply with the sustainability and greenhouse gas saving criteria. Hence, the definitions are not mutually exclusive.”

MEP Seán Kelly from the conservative European People’s Party group told EURACTIV that the directive should incentivise climate-neutral sources by not taxing renewable energy sources.

He said low-carbon sustainable biofuels and biogas would have to meet minimum sustainability criteria in the Renewable Energy Directive, which would become stricter in the recasting of the directive.

“The level of carbon emissions and sustainability compared to fossil fuels should be reflected in lower minimum tax rates than those proposed,” he added.

The Irish MEP explained that the revision of the directive was generally a step in the right direction as it would remove hidden advantages for fossil fuels and harmonise rates.