Europe Taxes Electricity More Than Gas. Brussels Just Admitted It

The Fix Is Fiscal, Not Another Subsidy

The clearest institutional voice making the same case before the plan landed is the Global Renewables Alliance, the industry coalition behind Electrify Now, whose members and more than 100 partner companies with a combined $1.5 trillion in revenue put their names to a public statement in June demanding governments move faster on electrification. The Commission cites Electrify Now, launched in London on June 23 with the COP30, COP31 and COP32 presidencies, as the global companion to its own plan. When I asked Bruce Douglas, the Alliance’s CEO, for the single non-technical barrier he would clear first, he pointed straight at the tax code. “Taxation on electricity is two, three, four times what it is on gas in many European countries. And that’s a global phenomenon. So that’s historic, and it needs to change,” he told me on July 3. Douglas speaks for an industry with an obvious interest in the answer, which makes it worth testing his numbers rather than taking them on faith. Two weeks later the Commission published a plan that lands in the same place.

That fix is not the one governments usually reach for. It is not a subsidy, and it is not deregulation. “Realigning doesn’t mean just removing it,” Douglas said. “You can move it from electricity to general taxation, for example. So the state still gets the money, but it’s from general taxation, not targeted at something that we want to accelerate.” Tax what a government wants to discourage, and stop taxing what it wants more of. Some of what looks like tax is cost-recovery for grids and renewables buildout rather than pure distortion, so shifting it to income tax or VAT is a real trade-off, not a free lunch, and a finance ministry would rather keep a revenue line it already controls than reopen the budget to build a new one. But for a Treasury official, the appeal is still revenue-neutral by design: no new subsidy to defend at the next spending review. For a utility CFO, it changes the economics of switching a fleet to electricity before a single new turbine gets built.

Brussels Names the Gap. Finance Ministries Still Own It

Whether governments actually make that transfer is the more interesting question, and Europe has just supplied a live test. France has already moved, with its “Plan national d’electrification des usages” cutting fossil fuels from about 60% of final energy consumption to 40% by 2030 and nearly doubling electrification funding to €10 billion a year. The French excise duty on electricity still sits at €33.70 per megawatt-hour against €17.16 for gas, roughly two to one, showing how far even a government already committed to electrification has to go on tax alone. The Netherlands and Belgium have taken steps to rebalance electricity and gas taxes, and Denmark has cut electricity excise for heat-pump households, the Commission notes. None of that closes the EU-wide gap.

The plan itself is ambitious on paper and careful where the hard money sits. It sets an indicative target of 46% of final energy demand from electricity by 2040, up from a stagnant 23% today, with a 32% reference point for 2030. Hitting the path, the Commission says, could cut the EU’s fossil-fuel import bill by up to €260 billion a year by 2040 and slash gas imports by more than 70%. It asks Member States to bring national electricity-to-gas price ratios down to a maximum of 2.5 for households and 2 for industry by 2030. Alongside the Communication it tabled a legislative proposal on network charges that includes a provision on the tax differential between electricity and gas, and it promises measures to phase out fossil-fuel subsidies, still €97 billion in 2024, only in the post-2030 Energy Union package due in the fourth quarter of this year. The principle is now explicit: “electricity should not be taxed more than gas.” What the plan does not do is rewrite the Energy Taxation Directive, which still needs unanimity among 27 finance ministries and has sat blocked in Council for years. Ambition on paper and delivery are not the same thing, and the gap between them is where this argument gets tested.

Where Policy Stops Fighting Electricity, Capital Follows

Capital moves fast once a signal is unambiguous, which is why the tax question matters more than it looks. The UK secured over £100 billion in announced private clean-energy investment in under two years, per the Department for Energy Security and Net Zero, once auction rules and grid commitments became predictable. Spain and Portugal have decoupled power prices from gas to a degree the rest of the continent has not: gas set the price in only about 15% of hours in Spain this year against roughly 89% in Italy, and Spanish wholesale prices ran around 30% below the EU average in the first half of 2025, per Ember. Douglas frames the Iberian discount as two to four times cheaper than Italy, true in the hours when Spanish solar floods the market, but overstating the average; the steadier figure is roughly 30%. Both examples show the same pattern: where policy stops working against electrification, investment follows quickly. Tax is one of the few levers left where policy is still working against it by default.

Grids Are Harder. The Tax Code Is Still Cheaper

Tax distortion is the sharper argument, but not the only one, and Douglas ranks a second barrier just behind it: grid capacity, harder to fix on a legislative timetable. IRENA puts global grid investment needs at $1.2 trillion a year, against roughly $0.5 trillion actually invested in 2025, with some 2,500 gigawatts of wind and solar stuck waiting for connections worldwide. The Commission names the same bottleneck: grid capacity, connection queues and under-used existing networks. Here too, the proposed fix is administrative rather than a check governments have to write. “At the moment a lot of them have first come, first served, and the first come is not necessarily the best project,” Douglas said. “It can be first ready, first served. And now there’s even most appropriate first served.” A regulator could rewrite that queuing rule without waiting for a budget cycle, the same logic as the tax fix: the cheapest barriers left are the ones sitting in rulebooks, not in physics.

Neither fix is a Western-only story. Ethiopia has banned fossil-fuel car imports and runs a grid overwhelmingly hydro-powered; Pakistan, facing high power prices and falling solar costs, has posted one of the fastest solar build-out rates anywhere in the world. Neither waited for a global consensus on decarbonization. Both moved once the economics turned in electricity’s favor, which is the argument in miniature: the technology and the money are largely ready. What is left standing in the way is mostly paperwork, and tax codes are the oldest paperwork in government.

None of this makes grid capacity irrelevant, and it would be a mistake to read Douglas’s ranking as the final word rather than one well-placed industry view among several. But the arithmetic holds regardless of who states it: a tax gap that costs European treasuries nothing to close is still open, and Brussels has now written the diagnosis into an official action plan without yet forcing the cure. The test will not be whether renewables can get cheaper. It will be whether twenty-seven finance ministries can agree to stop taxing the fuel they say they want more of.