15EU decision-making on energy and climate policy
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Committee’s assessment |
Legally and politically important |
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Cleared from scrutiny |
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Document details |
Commission Communication: A more efficient and democratic decision making in EU energy and climate policy. |
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Legal base |
— |
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Department |
Treasury |
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Document Number |
(40505), 8417/19, COM(19) 177 |
Summary and Committee’s conclusions
15.1The Commission’s document concerns a suggested move away from taking decisions on energy taxation by unanimity and a proposal that decision-making under the European Atomic Energy Community (Euratom) be re-visited.
Move from unanimous decision-making for energy taxation
15.2EU decisions on all taxes must currently be taken unanimously. In line with the Commission’s wider approach to tax decisions,147 the Commission suggests that the EU no longer takes decisions on energy taxation by unanimity but instead should do so by qualified majority voting (QMV) and as a joint decision with the European Parliament under the ordinary legislative procedure. This means that each Member State would lose its veto, and decisions would instead require only 55% of Member States, representing at least 65% of the EU population, to vote in favour of a proposal in order for it to be adopted, as well as the agreement of the European Parliament. Such a move, argues the Commission, would encourage discussion and compromise, supporting the EU’s transition to clean energy as part of its energy union objectives.
15.3The change is permitted under the Treaties but would require the support of all Member States. This approach would involve the use of one of the “passerelle” clauses, set out in article 48(7) of the Treaty on European Union (TEU) and article 192(2) of the Treaty on the Functioning of the European Union (TFEU) respectively, permitting the use of QMV and the ordinary legislative procedure in areas previously decided by unanimity. While the passerelle clause under Article 192(2) TFEU (environmental policy) is less onerous as the European Parliament’s consent is not required, it could only be applied to energy taxation measures that were primarily of an environmental nature. This might include measures aimed at reducing carbon dioxide and other polluting emissions or improving energy efficiency.
15.4The current EU legislation in this area is the Energy Taxation Directive (ETD),148 which the Commission argues is outdated. It provides mainly for:
- rules on taxation which aim to ensure that the single market operates smoothly and avoid double taxation or any distortion of trade and competition between energy sources and energy consumers and suppliers, which could result from considerable differences in national tax rates;
- minimum levels of taxation for energy products used as motor or heating fuel and for electricity; and
- identification of energy tax exemptions and reductions for sectors such as aviation, shipping and agriculture.
15.5The Commission notes that the Directive fails in its objectives of avoiding any distortion of trade and fails too to promote cleaner forms of energy as fuels are taxed according to volume rather than their energy content. While the Directive is currently subject to evaluation, changes will be more difficult if unanimity is required. As the Commission notes, a proposal in 2011149 to make changes to the Directive was ultimately withdrawn as it proved impossible to achieve the required unanimity among Member States.
15.6As set out earlier in the year, the Commission aims to make the shift from unanimity to QMV in four stages across tax. Energy taxation would form part of the second stage—using QMV for tax policy measures which are designed with other policy goals in mind. The Commission recommended that Member States decide swiftly on the use of the passerelle clause for the second stage and begin the process of consulting national Parliaments and the European Parliament.
Decision-making under the Euratom Treaty Reform
15.7EU policy in the area of nuclear energy is largely agreed under the European Atomic Energy Community (Euratom). While the European Parliament and national Parliaments have been afforded an increased role in decision-making under other EU Treaties, this has not been extended to the Euratom Treaty. The Commission suggests the establishment of a “High Level Group of Experts” to assess and report on the state of play of the Euratom Treaty and how its democratic accountability could be improved. The Commission suggests that, in time, a change of the Euratom Treaty itself would be required to reform decision-making procedures but that this should be seen in the longer-term, post-2025 perspective.
The Government’s position
15.8The Financial Secretary to the Treasury (Rt Hon. Mel Stride MP) says in his Explanatory Memorandum (EM) that the Government is not assured that the Energy Tax Directive is outdated and requires revision, as the Commission suggests in its Communication. The Government is opposed to any move from unanimity to QMV over tax policy. Unanimity, says the Minister, protects national sovereignty over tax policy and he also notes that the Commission does not make clear what can be achieved via QMV that could not be achieved under the present system of unanimity. While the UK remains a Member State, the Government will continue to set out its opposition to QMV for tax policy (including energy taxes).
15.9The Minister considers it unlikely that Member States will reach agreement quickly, if at all, on a way forward given that the decision to move from unanimity to QMV must itself be taken unanimously. This view was underlined by the discussion at the Economic and Financial Affairs (ECOFIN) Council on 12 February 2019, from which it was clear that unanimous support for the use of the passerelle does not currently exist. Further, national Parliaments must be given six months to respond to the European Council.
15.10As regards reform of the Euratom Treaty, the UK wishes to ensure that any future discussion on potential Treaty reform should avoid providing unnecessary uncertainty and burden for investors and industry and should not undermine the investments required to produce a decarbonised base-load electricity. In coordinating any future discussion and debate on Treaty reform, the Commission should carefully address any such adverse consequences arising from the High Level Group’s findings regarding the role of the European Parliament in the Euratom Treaty framework.
15.11The Minister observes that changing the Euratom Treaty would require unanimous agreement from all Member States and that agreement could therefore be challenging. Given that the Commission does not envisage Euratom Treaty change itself occurring until after 2025, there will be no impact on the intention set out in the Political Declaration on the future relationship between the EU and the UK, to conclude a wide-ranging Nuclear Cooperation Agreement (NCA) between the UK and Euratom.
15.12We considered the Commission’s Communication on a move away from unanimity over all tax policies at our meeting of 13 February 2019.150 We were clear in our view that EU tax policy—while the UK is a Member State or remains bound by EU tax legislation under the terms of the UK’s withdrawal from the EU—should remain subject to unanimity in the Council in all cases. That remains our view, including for energy taxation.
15.13Noting that any changes to the Euratom Treaty are likely to take effect once the UK has withdrawn from the EU, we do not take issue with the suggestion that decision-making under that Treaty be re-visited.
15.14We retained under scrutiny the earlier Communication on tax decision-making in anticipation of further information from the Treasury in due course about either definitive rejection of the Commission’s proposals or about a roadmap for the eventual introduction of QMV. As we expect any such information to cover energy taxation, we clear this Communication from scrutiny.
15.15We nevertheless draw the document to the House as legally and politically important. This is both because it covers potential legal changes to the ways in which the EU takes decisions and because any abolition of Member States’ right of veto over EU policies is politically controversial.
Full details of the documents
Commission Communication: A more efficient and democratic decision making in EU energy and climate policy: (40505), 8417/19, COM(19) 177.
Previous Committee Reports
None, but our Report of 13 February 2019 on the move from unanimity to QMV for all tax policy is relevant: Fifty-fifth Report HC 301–liv (2017–19), chapter 4 (13 February 2019).
147 COM(19) 8.
148 Directive 2003/96/EC.
149 COM(11) 169
Published: 11 June 2019