The taxes and subsidies to make the EU green

26/01/21

Green Deal Monitor

Achieving the Green Deal's ambitions - a zero emission circular economy - by 2050 will require substantial investment, much of which will have to be borne by the private sector. Taxes and subsidies encourage greening and sustainability. Our Green Deal Monitor #6 looks at what EU level taxes and subsidies are currently in place and what aspects may be missing in order to realise the objectives of the Green Deal.

A tax at the external borders of the EU

Within the European Union, the Emission Trading System EU ETS and the European Energy Tax Directive already exist. In the near future the Carbon Adjustment Mechanism will be added: a tax at the external borders of the EU to prevent carbon leakage, i.e. that production moves outside of the EU to regions with less stringent regulation on greenhouse gas emissions. The burden of this EU taxation is counterbalanced by programs such as Horizon Europe and the Innovation Fund that companies and countries can call upon to bring innovative technology to the market. The Green Deal Monitor #6 explains the main taxes and subsidy programs.

A good framework for emission pricing

PwC believes that the Emissions Trading Scheme, together with the European Energy Tax Directive and the Carbon Border Adjustment Mechanism, provides a good framework for emission pricing, but at the same time we advocate for rapid adjustments to this framework in light of new technological developments and more stringent emissions targets. The European Commission is already planning this. 'The current emission price is not pushing green investments hard enough for the EU to meet its accelerated climate ambitions. New technologies have come to the market and the highly complex patchwork of national energy tax rules and exemptions is not aligned with the European energy market as it looks today. Any update to this framework should be carried out with a view to creating an efficient and effective overall framework for emission pricing across the EU.'