By Kate Abnett
BRUSSELS, April 14 (Reuters) - The European Union plans to reduce electricity taxes and expand clean technologies faster to cut consumers’ exposure to soaring oil and gas prices, as part of its plan to offset the Iran war’s energy impact, a draft document showed.
Europe’s heavy reliance on oil and gas imports has left it exposed to spiralling prices since the Strait of Hormuz, a vital global oil and gas shipping route, was effectively closed and Tehran started attacking energy infrastructure in the Middle East.
The draft European Commission proposal, due to be published on 22 April, sets out short-term measures aimed at curbing energy bills, as well as plans to wean Europe off fossil fuels faster, to protect the continent from future oil and gas supply disruptions.
“The benefits of this transition clearly outweigh its costs. Europe cannot afford to remain exposed to increasingly frequent energy shocks,” the draft said. “Every delayed investment in the energy transition risks greater cost for society at a later stage.”
The EU executive in May will propose legal changes to the bloc’s taxation rules that would ensure electricity is taxed at a rate below that of fossil fuels, and make it easier for governments to cut energy-intensive industries’ electricity taxes to zero, according to the draft.
It said the EU will also present countries’ energy ministers next month with a catalogue of energy-saving investments and low-carbon technologies to replace oil and gas, and a legal proposal requiring countries to incentivise investments in smart grid technologies, to help bring more clean energy sources into the power mix.
The draft was reported earlier on Tuesday by Bloomberg News.
European gas prices nearly doubled in the three weeks after the U.S.-Israeli war on Iran began on February 28, and despite retreating since, were still around 35% above pre-war levels on Tuesday.
Other elements of the draft EU plan, which could change before it is published, would see the EU step in, starting this month, to coordinate countries’ gas storage filling, to avoid price hikes caused by companies rushing to buy at the same time.
Brussels also plans to propose an electrification target before summer, to push industries to switch from fossil fuels to electricity, the draft said.
A European Commission spokesperson declined to comment on the draft document.
Changing EU tax rules requires the unanimous approval of member nations, and recent attempts have failed. A 2021 Commission proposal to amend electricity taxes - which also aimed to incentivise the shift from fossil fuels - is still stalled.
(Reporting by Kate Abnett; Editing by Paul Simao)
