Berlin has lodged a formal complaint against a European Commission proposal that would tax electricity at a lower rate than natural gas, arguing that Brussels is using electricity-market legislation to circumvent EU tax rules and encroach on national sovereignty. The dispute, revealed in a letter seen by Euronews, threatens to complicate the bloc's ambitious electrification agenda.
The German Finance Ministry, in a letter signed by Director General Bastian Fleig, contends that the Commission's plan introduces substantial tax provisions through a legal instrument that could be adopted by qualified majority, rather than the unanimity traditionally required for EU tax measures. "I have significant doubts that (the proposal) ... can be adopted by a qualified majority. (It) is contrary to the unanimity requirement in tax law (...) it makes substantial tax-related provisions and directly interferes with national tax and budgetary sovereignty," Fleig wrote.
Electrification at stake
The objection comes as the EU accelerates efforts to electrify industry, transport, and energy sectors, with a recent target of 46% electrification by 2040 to reduce dependence on imported fossil fuels. Energy Commissioner Dan Jørgensen noted that the EU has paid over €22 billion in the 48 days following the outbreak of war in the Middle East without purchasing any new energy, underscoring the urgency of diversifying supply. Uncertainty over the Strait of Hormuz, a critical waterway for global energy shipments, has further galvanized Brussels to pursue electrification.
However, electricity remains significantly more expensive than fossil gas across the EU, often costing three to five times more per unit, which discourages households and businesses from switching to clean technologies like heat pumps. The Commission's proposal aims to make electricity more competitive by taxing it lower than gas, but Germany argues that this objective should not be used to reopen a compromise reached during negotiations over the Energy Tax Directive.
That earlier agreement deliberately gave member states flexibility in determining electricity taxation, with electricity removed from the Commission's proposed environmental ranking of energy carriers. Germany contends that the new proposal would effectively reintroduce that ranking through the back door, undermining the delicate balance struck in the directive.
Sovereignty vs. climate goals
The German objection signals a potential clash between the Commission's drive to make electrification financially attractive and member states' determination to retain control over taxation. The issue carries political significance beyond electricity bills, touching on fundamental questions of EU governance and fiscal autonomy.
In the letter, Fleig emphasized that Germany shares the broader goals of transformation and electrification, but objects to the Commission's chosen vehicle. "We all share the goal of transformation and electrification. (...) I do not share the approach of the European Commission," he wrote. Berlin proposes scrapping the gas-vs-electricity tax differential in the electricity market design law and instead negotiating electricity taxation under the proper EU framework, the Energy Tax Directive.
Environmental groups have sided with the Commission. Tom Lewis, energy policy coordinator at Climate Action Network Europe, said Germany should support the reform to close the price gap between electricity and gas. "Today, a German household pays on average over three times more per unit of electricity than it would for gas, making much-needed electrification, like installing heat pumps, less attractive than polluting gas boilers," Lewis told Euronews.
Finland and Sweden are the only EU countries that currently tax gas higher than electricity, highlighting the scale of the challenge elsewhere. Saverio Papa, head of energy at the European Heat Pump Association, noted that both energy taxation and network charges are key factors driving the high electricity-to-gas price ratio in Europe.
According to Commission figures, grid charges and taxes often exceed the price of the electricity consumed. Network charges account for 27% of household electricity bills and 21% of business bills, while national taxes and levies add another 24% for households and 16% for firms. These costs, combined with the proposed tax changes, could determine whether electrification becomes a viable option for European consumers and industries.
The standoff between Berlin and Brussels is likely to intensify as the EU pushes forward with its Green Deal and energy transition. While Germany's objections may slow the process, they also highlight the delicate balance between collective climate action and national fiscal sovereignty—a tension that will shape European energy policy for years to come.
