Proposal for a COUNCIL IMPLEMENTING DECISION authorising Finland to apply a reduced rate of taxation to electricity supplied to certain heat pumps, electric boilers and recirculating water pumps, in accordance with Article 19 of Directive 2003/96/EC
Date: 2022-05-20
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Finland, boiler, derogation from EU law, electrical energy, electricity supply, excise duty, geothermal energy, heat pump, heating, tax relief, technical specification

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   EUROPEAN COMMISSION  Brussels, 20.5.2022  COM(2022) 219 final 2022/0159 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Finland to apply a reduced rate of taxation to electricity supplied to certain heat pumps, electric boilers and recirculating water pumps, in accordance with Article 19 of Directive 2003/96/EC  
 
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  electricity1  (the  ‘Energy  Taxation  Directive’,  the  ‘ETD’  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. 

By letter dated 6 August 2021, followed by further correspondence of 4 November 2021,   26 
January  and  16  February  2022,  the  Finnish  authorities  requested  authorisation  to  apply  a 
reduced rate of taxation to electricity used to power certain heat pumps, electric boilers and 
recirculating water pumps. The requested period of validity is six years, from 1 January 2022 
until 31 December 2027, which is within the maximum period allowed by Article 19 of the 
Energy  Taxation  Directive.  The  objective  of  this  proposal  is  to  grant  that  authorisation  by 
means of a derogation valid for six years, as requested, until 31 December 2027.  

Finland is seeking for an authorisation to apply the national rate provided for business use of 
electricity  of  0.63  EUR/MWh  (rate  labelled  “category  II”  under  Finnish  law  which  covers 
only  certain  business  sectors2),  which  is  above  the  ETD  minimum  rate  for  business  use  of 
electricity of 0.5 EUR/MWh3, to the following: heat pumps and electric boilers that generate 
heat for the district heating network, heat pumps with a nominal thermal output of at least 0.5 
MW  not  connected  to  the  district  heating  network,  and  recirculating  water  pumps  in 
geothermal  heating  plants.  In  that  context,  according  to  the  information  provided  by  the 
Finnish authorities, the measure should target both some specific business and non-business 
use of electricity4. The national rate applicable to electricity for non-business use (rate named  
“category  I”  under  Finnish  rules,  covering  everything  else  than  category  II,  including 
households) is set at 22.53 EUR/MWh, well above the corresponding ETD minimum rate of 1 
EUR/MWh5.  

1 
2 

3 
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OJ L 283, 31.10.2003, p. 51–70. 
The Finnish authorities explained that the lower (“category II”) business-use electricity tax rate applied 
to sectors such asindustry, agriculture, mining and data centres.  
Article 10(1) and Annex I, Table C, of the Directive. 
In this regard, Finnish authorities underlined, for example, that while a  housing cooperative can itself 
manage the heat pump, it is possible that the same housing cooperative can buy the heat pump service 
from an energy company; in terms of the objective of the measure, it would not be justified for the tax 
treatment to be different in those situations on the basis of whether the operator is a housing cooperative 
or an energy company. Moreover, the physical supply chains of electricity within a property are often 
very complex, as there are different actors in the same building (with one electricity connection) - often 
the  same  building  has  residential  apartments  and  business  premises.  Therefore,  in  some  situations, 
separating  business  and  housing  premises    within  the  real-estate  network  in  order  to  implement  a  tax 
reduction  would be impossible.  Finally,  the Finnish authorities highlighted that a housing cooperative 
can sell the heat it generates back to the district heating network, and in this case, a housing cooperative 
can also have a business nature.    
Article 10(1) and Annex I, Table C, of the Directive. 

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The reduction aims to provide incentives for the deployment and use of electrically powered 
heating generation that is otherwise heavily reliant on polluting fossil fuels or on biomass and 
to  promote  non-combustion  heat  production  (as  a  heat  source,  for  example  heat  pumps  can 
use,  among  others,  outdoor  temperature,  ground-source  heat  and  deeper  geothermal  energy, 
sea and lake water and waste water heat; also different waste heat sources from industry, data 
centres and other cooling systems  can be used as heat sources) in order to reduce emissions 
and to save fossil and renewable natural resources.  

The  reduced  rate  would  apply  to  heat  pumps  and  electric  boilers  in  the  district  heating 
network,  to  heat  pumps  outside  of  the  district  heating  network  that  have  a  nominal  thermal 
output  of  at  least  0.5  MW  and  to  recirculating  water  pumps  in  geothermal  heating  plants. 
According to the reasoning provided by Finland, taxing all heat pumps and electric boilers at 
the lower rate would not be justified and well-grounded for several reasons. 

Considering for example heat pumps, the ones of a smaller size -not covered by the requested 
measure-  are  deemed  to  be  already  very  competitive.  In  addition,  applying  category  II 
electricity  tax  for  those  ones  would  require  separate  measurement  of  electricity  for  the 
purposes  at  stake  and  registration  of  beneficiaries.  There  are  more  than  1.1  million  heat 
pumps  in  Finland,  so  the  quantity  would  be  very  large  and  the  administrative  burden 
significant for different parties. 

Conversely, based on the estimations of the Finnish authorities for 2022, the chosen criteria 
would reduce the number of beneficiaries to less than one hundred. 

The  measure  would  apply  to  those  beneficiaries,  which  would  pay  2.19  cent/kWh  less  than 
the standard rate, resulting in EUR 10-15 million of tax expenditure, in the form of lower tax 
revenues (according to the estimations for 2022). 

• 

Consistency with existing policy provisions in the policy area 

Provisions under the Energy Taxation Directive 

Taxation of electricity is governed by the Energy Taxation Directive. In particular, Article 10 
and Annex I, Table C of that directive, provide for the relevant minimum levels of taxation, 
differentiated into business and non-business use, set out respectively at 0.5 EUR/MWh and 1 
EUR/MWh.  

Article 11 of the Directive contains among others the definition of ‘business use’ and allows 
Member States to limit the scope of the reduced level of taxation for business use.  

Finland  has  limited  the  scope  of  the  lower  business-use  electricity  tax  rate,  the    category  II 
rate of 0.63 EUR/MWh, to certain business sectors, namely industry, agriculture, mining and 
data centres.  

Other  electricity  consumption,  such  as  electricity  used  by  households,  belongs  to  the  tax 
category I, set at 22.53 EUR/MWh. 

The proposed reduced tax rate of 0.63 EUR/MWh for electricity would cover heat pumps and 
electric boilers that generate heat for the district heating network; heat pumps with a nominal 
thermal  output  of  at  least  0.5  MW  not  connected  to  the  district  heating  network,  and 
recirculating  water  pumps  in  geothermal  heating  plants  would  be  entitled  to  the  lower 
electricity tax.  

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For reasons of consistent and uniform application and of practical implementation, the lower 
electricity tax rate would apply not only to some business use but also to some specific non-
business  use,  which  should  be  subject  to  the  higher  level  of  taxation  under  the  Finnish 
category  I  rate  of  22.53  EUR/MWh.  In  this  respect,  to  further  substantiate  their  request, 
Finnish  authorities  highlighted  also  that  Article  15(1)(h)  of  the  Directive  allows  Member 
States to apply an exemption in the level of taxation of electricity used by households, while 
in their country electricity taxation for households would remain very high6 (category I of the 
Finnish  tax  rates  is  set  at  22.53  EUR/MWh,  much  above  the  EU  minimum  level).  The 
requested national tax rate would be however above the ETD minimum level of taxation for 
business use. 

Article 19(1), first subparagraph, of the Directive reads as follows:  

In addition to the provisions set out in the previous Articles, in particular in Articles 5, 15 and 
17, the Council, acting unanimously on a proposal from the Commission, may authorise any 
Member  State 
for  specific  policy 
considerations. 

further  exemptions  or  reductions 

introduce 

to 

The possibility to introduce a tax relief (reduced rate of electricity tax) for electricity supplied 
to  heat  pumps,  electric  boilers  and  recirculating  water  pumps,  that  meet  certain  conditions, 
can  be  envisaged  under  Article  19  of  the  Energy  Taxation  Directive,  since  its  purpose  is  to 
allow  the  requesting  Member  State  to  introduce  a  further  reduction  for  specific  policy 
considerations.  Supporting  the  electrification  of  the  heating  end-use  sector  and  promoting 
non-combustion heat production in order to reduce emissions and to save fossil and renewable 
natural  resources  can be considered such specific policy considerations. Finland’s  goal  is  to 
become climate neutral by 2035. The requested measure would foster the achievement of that 
goal. 

Finland  requested  for  the  measure  to  be  applicable  for  six  years  (starting  from  1  January 
2022), the maximum period allowed by Article 19(2) of the Directive. In principle, the period 
of  application  of  the  derogation  should  be  long  enough  to  encourage  investment  in  the 
targeted  electrically  powered  heating  solutions.  That  period  will  provide  the  maximum 
possible legal certainty for the relevant investments. 

However,  the  derogation  should  not  undermine  future  developments  of  the  existing  legal 
framework and should take into account the current revision of the Energy Taxation Directive 
and a possible adoption by the Council of a legal act based on the Commission’s proposal for 
the recast of the Energy Taxation Directive7. 

Under  those  circumstances,  while  it  appears  appropriate  to  grant  the  authorisation  for  the 
requested  period,  the  validity  of  the  derogation  should  be  made  subject  to  the  entry  into 

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The same authorities observed that in their country, approximately one half of electricity is consumed in 
the  higher,  category  I,  tax  and  households  account  for  slightly  more  than  one  half  within  the  tax 
category.  The  proposed  tax  change  would  conversely  concern  about  1%  of  the  total  tax  base  of 
electricity taxation in the country. 
Proposal for a Council Directive restructuring the Union framework for the taxation of energy products 
and electricity (recast), 14.7.2021, COM(2021)563 final 2021/0213 (CNS). In the context of the Fit for 
55 package, the proposal aims, among others, at fostering electrification and the use of more sustainable 
energy sources; moreover, it keeps the current possibility for Member States to ask for derogations. 

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application of general  provisions  on the matter, at  a point in  time earlier  than  31 December 
2027.  

State aid rules 

The  envisaged  reduced  tax  rate  of  EUR  0.63  per  MWh  is  above  the  EU  minimum  level  of 
taxation  for  electricity  for  business  use  pursuant  to  Article  10  and  Annex  I,  Table  C,  of 
Directive 2003/96/EC. 

The measure may constitute State aid in accordance with Article 107(1) of the TFEU. Since 
the  reduced  rate  is  above  the  EU  minima,  the  measure  would  be  covered  by  Article  44  of 
Regulation  651/2014/EU  (the  General  Block  Exemption  Regulation)8.  Upon  expiry  of  the 
period of validity of the General Block Exemption Regulation on 31 December 2023 the aid 
remains exempted during an adjustment period of six months (see Article 58(4) of the General 
Block  Exemption  Regulation).  The  decision  is  without  prejudice  to  the  applicable  State  aid 
rules during the period covered by the derogation.  

• 

Consistency with other Union policies 

Environment and climate change policy 

The requested measure aims at promoting non-combustion heat production in order to reduce 
emissions  and  to  save  fossil  and  renewable  natural  resources.  In  its  Article  13,  Directive 
2008/50/EC  on  Ambient  Air  Quality9  requires  Member  States  to  ensure  that  the  levels  of 
several  air  pollutants  are  kept  below  the  limit  values,  target  values  and  other  air  quality 
standard established in the Directive.   

Moreover, Finland’s country specific electricity mix consists mostly of renewable (47%) and 
nuclear  electricity  (35%)10,  both  of  which  are  zero  or  low-carbon.  Therefore,  it  is  expected 
that  further  electrification  of  large-scale  heating  applications  will  result  in  significant 
environmental and climate benefits. 

Hence, the measure is compatible with EU environment and energy policies, most notably the 
EU  Green  Deal,  the  Fit  for  55  package  promoting  electrification,  and  the  2050  long-term 
decarbonisation agenda, in which electrification plays a central role. 

Energy policy 

The measure would contribute to realising the ambitions of the EU Green Deal, especially in 
the context of the EU’s Strategy for Energy System Integration11. 

The EU Strategy for Energy System Integration provides the framework for the green energy 
transition.  The  current  model  where  energy  consumption  in  transport,  industry,  gas  and 
buildings  is  happening  in  ‘silos'  -  each  with  separate  value  chains,  rules,  infrastructure, 

8 

9 

10 
11 

Commission  Regulation  (EU)  No  651/2014  of  17  June  2014  declaring  certain  categories  of  aid 
compatible  with  the  internal  market  in  application  of  Articles  107  and  108  of  the  Treaty  (OJ  L  187, 
26.6.2014, p. 1–78). 
Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air 
quality and cleaner air for Europe (OJ L 152, 11.6.2008, p 1). 
European Commission: Energy statistical country datasheets 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Powering  a  climate-neutral 
economy: An EU Strategy for Energy System Integration (COM/2020/299 final of 8.7.2020). 

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planning  and  operations  -  cannot  deliver  climate  neutrality  by  2050  in  a  cost  efficient  way. 
The requested measure would foster the integration of the heating end-use sector with other 
end-use sectors. In line with the Strategy, the requested measure would also lower the costs of 
innovative  solutions  that  have  to  be  integrated  in  the  EU’s  energy  system.  The  requested 
measure would directly  contribute to  two of the  three pillars of the  EU Strategy for Energy 
System Integration.  

Firstly,  a  more  ‘circular'  energy  system,  with  energy  efficiency  at  its  core.  The  strategy   
identifies concrete actions to apply the ‘energy efficiency first’ principle in practice and to use 
local  energy  sources  more  effectively  in  buildings  or  communities.  There  is  significant 
potential  in  the  reuse  of waste  heat  from  industrial  sites,  data  centres,  or  other  sources,  and 
energy produced from bio-waste or in wastewater treatment plants. The measure requested by 
Finland aims to support, among others, the use of waste heat from sources explicitly listed by 
the Strategy. 

Secondly,  a  greater  direct  electrification  of  end-use  sectors.  As  the  power  sector  has  the 
highest  share  of  renewables,  electricity  should  be  increasingly  used  where  possible,  for 
example,  for  heat  pumps  in  buildings.  The  measure  requested  by  Finland  aims  to  support 
electrically powered application, in line with the Strategy. 

That  measure  would  foster  energy  system  integration  since  district  heating  networks  offer 
more flexibility and ability to store electric energy in the form of heat as compared to separate 
building  heating  solutions.  Finland  already  has  a  well-developed  district  heating 
infrastructure, which can serve that purpose. 

The  requested  derogation  to  use  a  lower  tax  rate  would  also  apply  among  others  to  certain 
electric boilers. Such reduction can also contribute to energy system integration and to system 
integration  of  renewable  electricity.  Electric  boilers  can  be  used  for  producing  heat  into 
district  heating  networks  especially  in  the  times  when  there  is  surplus  of  electricity  and  the 
electricity  price  is  low.  That  allows,  for  example,  the  use  of  wind  power  for  district  heat 
production.  The  small  investment  costs  of  the  electric  boilers  enable  profitability  with  only 
few  operating  hours  and  heat  production  can  take  place  only  when  there  is  oversupply  of 
electricity.  That  can  contribute  to  maintaining  the  stability  of  the  electricity  system.  The 
impact  of  the  electricity  taxation  to  the  heat  production  cost  is  currently  significant  and,  as 
said  before,  it  could  be  a  good  moment  to  use  those  appliances.  Electric  boilers  can  be 
combined with heat storage capacity, which allows storage of excess power as heat. 

The  measure  requested  by  Finland  is  also  in  line  with  the    EU’s  Strategy  on  Heating  and 
Cooling12  which  recalls  the  benefits  of  replacing  fossil  fuel  based  heating  solutions  by  heat 
pumps and waste heat use. The Strategy states that heat pumps can turn one unit of electricity 
into three or more units of heating or cooling. 

The  above  mentioned  benefits  are  also  highlighted  in  the  context  of  the  EU’s  Energy 
Efficiency Directive and specifically by the Commission Recommendation on the content of 

12 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the  Committee  of the  Regions:  An EU strategy  on heating and 
cooling (COM/2016/051 final of 16.2.2016). 

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the comprehensive assessment of the potential for efficient heating and cooling under Article 
14 of Directive 2012/27/EU13 (the Energy Efficiency Directive).  

Internal market and fair competition 

The  measure  would  be  open  to  all  EU  operators  without  discrimination.  The  reduced  rate 
would apply to all heat producers using heat pumps and electric boilers that generate heat for 
the  district  heating  network,  heat  pumps  with  a  nominal  thermal  output  of  at  least  0.5  MW 
used outside the district heating network and recirculating water pumps in geothermal heating 
plants. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

• 

Subsidiarity (for non-exclusive competence)  

The  field  of  indirect  taxation  covered  by  Article  113  of  TFEU  is  not  in  itself  within  the 
exclusive competence of the European Union within the meaning of Article 3 of TFEU. 

However,  pursuant  to  Article  19  of  Directive  2003/96/EC,  the  Council  has  been  granted  an 
exclusive competence, as a matter of secondary law, to authorise a Member State to introduce 
further exemptions or reductions within the meaning of that provision. Member States cannot 
therefore substitute themselves for the Council. As a result, the principle of subsidiarity is not 
applicable  to  the  present  implementing  decision.  In  any  event,  since  this  act  is  not  a  draft 
legislative act, it should not be transmitted to national Parliaments pursuant to Protocol No 2 
to the Treaties for review of compliance with the subsidiarity principle. 

• 

Proportionality 

The proposal respects the principle of proportionality. The tax reduction does not exceed what 
is necessary to attain the objective in question. 

• 

Choice of the instrument 

The  instrument  proposed  is  a  Council  implementing  decision.  Article  19  of  Directive 
2003/96/EC makes provision for this type of measure only. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The measure does not require the evaluation of existing legislation. 

• 

Stakeholder consultations 

This proposal is based on a request made by Finland and concerns only this Member State. 

13 

Commission  Recommendation  (EU)  2019/1659  of  25  September  2019  on  the  content  of  the 
comprehensive assessment of the potential for efficient heating and cooling under article 14 of Directive 
2012/27/EU 

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• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request 
and does not require an impact assessment. 

Across  the  EU,  the  heating  end-use  sector  is  generally  reliant  on  fossil  fuel  combustion. 
According  to  Eurostat  data  (NRG_BAL_PEH)  70%  of  derived  heat  is  produced  from  fossil 
fuels. Among others, heat pumps are electrically powered alternatives to fossil fuel based heat 
generation. As Finland’s country specific electricity mix consists mostly of renewable (47%) 
and nuclear electricity (35%), both of which are zero or low-carbon, it is expected that further 
electrification  of  large-scale  heating  applications  will  result  in  significant  environmental 
benefits.  Furthermore,  those  benefits  can  provide  a  contribution  to  achieving  the  Union’s 
environmental and climate objectives. 

Concerning particularly heat pumps and district heating, according to a study commissioned 
by  the  Finnish  government,  in  2020  in  Finland, 11%  of  the  total  district heating  production 
was based on waste heat sources. Unused excess heat and waste heat potential is estimated to 
be significant, but the utilization of different heat streams in district heat production is often 
challenging and the feasibility and profitability of waste heat utilization varies considerably. 
The  electricity  cost  of  heat  pumps  is  one  central  factor  impacting  the  profitability  of  heat 
pump  investment  and  use.  With  the  current  electricity  tax  level  in  Finland,  the  share  of 
electricity  tax  is  a  significant  part  of  the  total  electricity  cost.  Based  on  the  case  studies 
analysed, the cost effect of the electricity taxation is about 10-20% of the total costs of a heat 
pump,  when  both  operating  and  investment  costs  are  taken  into  account.  If  the  heat  pumps 
used  in  district  heat  production  are  transferred  into  the  lower  category  II  electricity  tax,  as 
requested  by  Finland,  this  would  significantly  decrease  the  average  production  cost  of 
different heat pump solutions. That is likely to increase the interest to invest in heat pumps. 
Currently  the  heat  production  solutions  based  on  fuel  use,  especially  local  biomass,  are 
typically more cost  efficient compared to heat pump solutions. As Finland is decreasing the 
use  of  fossil  fuels  and  peat,  it  would  mean  that  the  use  of  biomass  in  district  heating 
production increases rapidly. Increasing use of waste heat and different heat pump solutions 
could reduce the increase in the biomass use. 

The  study  furthermore  highlights  that  waste  heat  utilization  often  contains  uncertainties 
related to  the security of supply of the heat,  potential  counterparty risks and risks related to 
investment costs and availability of the heat. In addition, some technologies, like geothermal 
energy  production,  are  still  in  piloting  phase.  Electricity  tax  decrease  for  the  heat  pumps 
would  improve  the  competitiveness  of  heat  pumps  compared  to  other  heat  production 
technologies, and could partly compensate other risks and uncertainties connected to the heat 
pump investments. 

Finally,  as  observed  by  Finnish  authorities,  the  measure  involves  questions  that  are 
technically  difficult  to  implement.  The  measure  should  be  implemented  in  a  well-targeted, 
neutral and fair manner. According to their estimations, the budgetary expenditure is expected 
to range from EUR 10 to 15 million in 2022. 

• 

Regulatory fitness and simplification 

The  measure  does  not  provide  for  a  simplification.  It  is  the  result  of  the  request  made  by 
Finland and concerns only this Member State. 

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• 

Fundamental rights 

The measure has no bearing on fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The  measure  does  not  impose  any  financial  or  administrative  burden  on  the  Union.  The 
proposal therefore has no impact on the budget of the Union. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

An  implementation  plan  is  not  necessary.  This  proposal  concerns  an  authorisation  for  a  tax 
reduction  for  an  individual  Member  State  upon  its  own  request.  It  is  provided  for  a  limited 
period. The applicable tax rate would be above the minimum level of taxation for electricity 
for  business  use  set  by  the  Energy  Taxation  Directive.  Therefore,  it  would  respect  the 
minimum  set  by  the  Directive  for  business  use.  The  measure  can  be  evaluated  in  case  of  a 
request for a renewal after the expiration of the initially granted validity period. 

• 

Explanatory documents (for directives) 

The proposal does not require explanatory documents on the transposition.  

• 

Detailed explanation of the specific provisions of the proposal 

Article 1 stipulates that Finland will be allowed to apply a reduced taxation rate to electricity 
supplied to the following applications: heat pumps and electric boilers that generate heat for 
the  district  heating  network,  heat  pumps  with  a  nominal  thermal  output  of  at  least  0.5  MW 
outside of the district heating network, and recirculating water pumps in geothermal heating 
plants.  The  tax  rate  must  not  be  less  than  EUR  0.50  per  MWh,  i.e.  the  minimum  level  of 
taxation for electricity for business use set by the Directive.  

Article  2  stipulates  that  the  authorisation  requested  is  granted  with  effect  from  1  January 
2022, until 31 December 2027, which is the maximum period allowed by the Directive. 

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2022/0159 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Finland to apply a reduced rate of taxation to electricity supplied to certain 
heat pumps, electric boilers and recirculating water pumps, in accordance with Article 
19 of Directive 2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity14, and in particular 
Article 19 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

By letter of 6 August 2021, Finland requested authorisation to apply a reduced rate of 
taxation to electricity supplied to heat pumps and electric boilers that generate heat for 
the district heating network, to heat pumps with  a nominal thermal output of at least 
0.5  MW  not  connected  to  the  district  heating  network,  and  to  recirculating  water 
pumps in geothermal heating plants, pursuant to Article 19 of Directive 2003/96/EC.  
Additional  information  and  clarifications  in  support  of  the  request  were  provided  by 
the Finnish authorities on 4 November 2021, 26 January 2022, and 16 February 2022. 

Through the  envisaged  reduced rate,  Finland aims  at  increasing the  electrification of 
the heating end-use sector and promoting non-combustion heat production in order to 
reduce  emissions.  The  increased  use  of  electrically  powered  heating  installations  is 
expected to result in environmental and climate benefits.  

Allowing  Finland  to  apply  a  reduced  rate  of  taxation  to  electricity  supplied  to  heat 
pumps and electric boilers that generate heat  for the district heating network, to heat 
pumps with a nominal thermal output of at least 0.5 MW not connected to the district 
heating network, and to recirculating water pumps in geothermal heating plants, does 
not  go  beyond  what  is  necessary  to  increase  electrification  of  the  heating  end-use 
sector. Such heating installations promote the green transition and decrease the use of 
heat production based on burning fuels. Those installations are not yet competitive on 
the market, and the measure limits the administrative burden. Therefore, the measure 
is unlikely to lead to significant distortions in competition during its lifetime and will 
thus not negatively affect the proper functioning of the internal market.   

(4) 

Each  authorisation  granted  under  Article  19(2)  of  Directive  2003/96/EC  is  to  be 
strictly limited in time. In order to ensure that the authorisation period is sufficiently 
long so as not to discourage relevant economic operators from making the necessary 
investments, it is appropriate to grant the authorisation  from 1 January 2022 until 31 
December 2027. However, in order not to undermine future general developments of 

14 

OJ L 283, 31.10.2003, p. 51. 

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the  existing  legal  framework,  it  is  appropriate  to  provide  that,  should  the  Council, 
acting on the basis of Article 113 or any other relevant provision of the Treaty on the 
Functioning  of  the  European  Union,  introduce  a  modified  general  system  for  the 
taxation  of  energy  products  and  electricity  to  which  this  authorisation  would  not  be 
adapted,  this  authorisation  should  cease  to  apply  on  the  day  on  which  those  general 
rules become applicable. 

(5) 

In  order  to  enable  installation  operators  to  pursue  the  promotion  of  heat  pumps  and 
electric boilers that generate heat for the district  heating network, heat pumps with a 
nominal  thermal  output  of  at  least  0.5  MW  not  connected  to  the  district  heating 
network,  and  recirculating  water  pumps  in  geothermal  heating  plants,  it  should  be 
ensured  that  Finland  may  apply  the  tax  reduction,  as  requested,  with  effect  from  1 
January 2022. 

(6) 

This  Decision  is  without  prejudice  to  the  application  of  Union  rules  regarding  State 
aid, 

HAS ADOPTED THIS DECISION:  

Article 1 

Provided  that  the  minimum  level  of  taxation  referred  to  in  Article  10  of  Directive 
2003/96/EC,  as  set  out  for  business  use  under  Annex  I,  Table  C,  to  that  Directive,  is 
respected, Finland is authorised to apply a reduced rate of taxation to electricity supplied to 
any of the following: 

a) heat pumps and electric boilers that generate heat for the district heating network; 

b) heat pumps with a nominal thermal output of at least 0.5 MW not connected to the district 
heating network; 

c) recirculating water pumps in geothermal heating plants. 

Article 2 

This Decision shall apply from 1 January 2022 until 31 December 2027. 

However,  should  the  Council,  acting  on  the  basis  of  Article  113  or  any  other  relevant 
provision  of  the  Treaty  on  the  Functioning  of  the  European  Union,  introduce  a  modified 
general system for the taxation of energy products  and electricity to which the authorisation 
granted in Article 1 of this Decision would not be adapted, this Decision shall cease to apply 
on the day on which those general rules become applicable. 

This Decision is addressed to the Republic of Finland 

Done at Brussels, 

Article 3 

For the Council 
The President 

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