EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Taxation of energy products and electricity in the Union is governed by Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (the ‘Energy Taxation Directive’ or the ‘Directive’).

Pursuant to Article 19(1) of the Directive, in addition to the provisions laid down in particular in its Articles 5, 15 and 17, the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce further exemptions or reductions in the level of taxation for specific policy considerations.

Article 15(1)(e) of the Directive allows Member States to apply a tax reduction or tax exemption to electricity used for the carriage of goods and passengers by rail, metro, tram and trolley bus. However, there is no provision that allows for a tax reduction for electricity used for transportation by electric vehicles different from trolley buses.

By virtue of Council Implementing Decision (EU) 2016/2266, the Netherlands has already been authorised to apply a reduced level of taxation to electricity supplied to charging stations for electric vehicles until 31 December 2020.

The objective of this proposal is to allow the Netherlands to continue to apply a reduced level of taxation to electricity, supplied to charging stations for electric vehicles, as requested, starting from 1 January 2021 and until 1 January 2025. This reduction is meant to continue to promote the use of cleaner modes of transportation, as well as to reduce local air pollution and the CO2 emissions from transport.

By letter dated 30 March 2020 and subsequent correspondence, in accordance with Article 19 of the Directive, the Dutch authorities informed the Commission that they intend to apply a reduced tax rate of EUR 51.64 per MWh to electricity supplied to charging stations for electric vehicles for the annual consumption of up to 10 MWh per charging station. The consumption over 10 up to 50 MWh would be taxed at the rate of EUR 51.64, the consumption over 50 up to 10 000 MWh would be taxed at a rate of EUR 13.75 and the annual consumption over 10 000 MWh would be taxed at a rate of EUR 0.56. For charging stations which are not covered by the tax rates for business use, the annual consumption over 10 000 MWh would be taxed at a rate of EUR 1.13. The overall tax rate will be above the minimum rate of taxation for electricity for business use as laid down in Directive 2003/96/EC. The national rate of taxation currently applicable to electricity used to charge electric vehicles for the initial 10 MWh of the annual consumption would be EUR 94.28 per MWh, which is the national rate of taxation of electricity for business and non-business use for this consumption level. Currently the Netherlands applies differentiated national tax rates for electricity according to the quantity consumed in accordance with Article 5, of Directive 2003/96/EC.

Supplementary information was received from the Netherlands on 20 November 2020.

The Netherlands would continue to apply the reduced rate of taxation to electricity supplied to electric vehicles by dedicated public and, in some cases, private or corporate charging stations for electric vehicles. These charging stations have normally a direct connection to the grid. The charging station operators and the private or corporate entities entitled to apply the reduced rate will be obliged to submit a declaration to the electricity supplier stating that the grid connection is exclusively intended for the supply of electricity to electric vehicles. The request made by the Netherlands excludes from the reduction charging stations where the charging takes place with exchange of batteries.

The overall rate of taxation, including the reduced rate for the initial 10 MWh of the annual consumption of each entity, would be well above the minimum level set in Annex I, Table C of Council Directive 2003/96/EC.

According to the Dutch authorities, in case the charging station operator intends to apply a reduced tax rate to electricity for its charging stations, it would be obliged to submit a declaration to the electricity supplier explaining which of the grid connections are exclusively intended for the supply of electricity to electric vehicles. The measure would apply only for the electricity supplied to the designated connections. Furthermore, the charging station operator is obliged to inform the electricity supplier in case it has financial problems and is eligible for aid in line with the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (2014/C 249/01). In that case, the supplier will no longer be allowed to apply the reduced energy tax rate on electricity.

The advantage derived from the reduced tax will vary depending on the amount of kilowatt-hours. As highlighted by the Dutch authorities, based on a study commissioned at national level, on average a supply of 3 900 kWh is estimated per charging station in 2020. In that case, the maximum advantage per charging station in 2020 is estimated at EUR 289 per year. This advantage will grow if the standard energy tax increases. Moreover, a charging station can in practice supply 12 000 kWh per year. This leads to an expected maximum total advantage of EUR 815 in 2020. The number of charging stations per beneficiary varies.

As reported by the Dutch authorities, currently there are around 40 charging station operators in the Netherlands.

The measure is open to all EU operators without discrimination. The country of origin of the operator of the charging station is not a condition to benefit from the measure. A transportation company or a household having a charging station could also benefit from the measure provided they fulfil the conditions mentioned above.

As highlighted in the request, a study commissioned by the Dutch ministry of transportation has showed that currently, in many cases, there is still not a positive business incentive for public charging stations. This is an obstacle for the development of the public charging infrastructure and the use of electric cars. The measure aims at continuing to improve the business case for public charging stations, which should make the use of electric cars more attractive and improve the environment. A fast development of public charging infrastructure is of vital importance for the transition from vehicles with internal combustion engines running mostly on fossil fuels to electric vehicles. A well-developed infrastructure is necessary to make electric vehicles a feasible alternative to traditional road transport. This is important because of the environmental benefits of the transition to electric driving. Electric vehicles generally produce less CO2-emissions and local air pollutants (PM10, NOx) than fossil fuel vehicles. According to the Dutch authorities, in 2019 the percentage of electricity produced by coal was 14%. It is projected that in 2030 that percentage will be 0%. In 2019, the electricity mix in the Netherlands from renewable sources was 18% in 2019 and it is expected to be 58% in 2025 and 75% in 2030.

The request highlights that the charging station operator would have the option to pass (part of) the advantage of the measure on to their customers in the form of a reduction on the charging rates. In that case, the cost of ownership of electric vehicles would be reduced due to lower costs for driving. This will create an incentive for consumers to choose a new electric car over a new fossil fuel car. Another positive effect of the lower charging rates is that the owners of plug-in hybrid vehicles that can run on electricity as well as on fossil fuel will be encouraged to use electric energy rather than fossil fuel for transportation.

As regards the period of application of the measure, in principle, that period should be long enough in order to continue to provide legal certainty to electricity operators, private or corporate entities. The Netherlands has asked for a prolongation of four years compared to the maximum possible six years. Under these circumstances, it appears appropriate to grant the authorisation requested for a period of four years as requested by the Netherlands and allowed by the Directive.