EU Commission to Propose Lower Electricity Taxes and Binding Electrification Target

The European Commission is scheduled to publish a draft proposal on April 22, 2025, outlining measures to address high energy bills. The proposal is expected to include plans to lower electricity taxes and reduce the European Union's dependency on fossil fuels.

To compensate for potential revenue shortfalls, experts have called for a windfall tax on fossil fuel profits, a measure the Commission has previously signaled support for.

Proposed Measures

According to multiple reports, the upcoming proposal will contain several key components:

• A plan to reduce taxes on electricity for consumers.
• Legal changes to EU taxation rules to make the tax on electricity lower than taxes on oil and gas. The Commission is reportedly set to propose these changes from May 2025.
• Measures to build on and accelerate the EU's existing Affordable Energy Action Plan, which focuses on encouraging electrification through tax reductions, expanding renewable energy, and improving electrical grids.
• A binding electrification target, which the Commission is planning to propose before the summer of 2025.

Market and Price Context

The proposal comes amid significant increases in European energy prices.

• European natural gas prices have risen by more than 70% since the start of the conflict involving Iran.
• The Strait of Hormuz, a transit route for approximately 20% of global oil flows, is effectively closed. Oil prices have risen above $100 per barrel.
• Wholesale electricity prices across Europe are largely determined by the cost of gas-fired power generation, meaning the surge in gas prices has directly increased electricity bills.

Background on EU Energy Taxation

The proposed tax changes would alter a long-standing structure.

• EU rules on electricity taxation have not been amended since 2003.
• A previous tax reform proposal in November 2025 failed to gain the required unanimous support from member states.
• According to Eurostat data from early 2025, the average EU household electricity price was approximately €0.29 per kilowatt-hour (kWh), while the average household gas price was €0.11 per kWh.
• In 2024, taxes and levies accounted for nearly 28% of the average European consumer's electricity bill.
• Historically, electricity taxes have been higher in part to fund renewable energy and environmental policies, while lower gas prices were intended to maintain affordability for fossil fuel-dependent heating and transport.

Statements and Reported Positions

European Commission President Ursula von der Leyen has made public statements on the issue.

"We are paying a very high price for our over-dependency on fossil fuels," von der Leyen stated. She also said, "The grim reality for our continent is fossil fuel energy will remain the most expensive option in years to come."

The European Commission has argued that lowering electricity taxes is key to encouraging a shift from fossil fuels to cleaner energy sources.

Other reported viewpoints include:

• Critics of the current tax structure say it discourages the switch to cleaner energy, particularly as heating and transportation sectors become increasingly electrified.
• Experts have called for a windfall tax on fossil fuel profits, which have increased since the onset of the Iran conflict, to offset potential government revenue shortfalls from electricity tax reductions.
• The European Commission has signaled support for such a windfall tax. A similar tax was temporarily introduced during the energy crisis following Russia's invasion of Ukraine.