The European Court of Justice interpreted the provisions of Directive 2003/96/EC on the Community taxation of energy products and electricity in case no. C-833/21.
The directive excludes double taxation in the case of the production of electricity, stating that the subject of the tax is the electricity itself, while the energy product used as a raw material for its production is exempt. Member States may deviate from this provision only for environmental protection purposes.
In the specific case, the European Court examined the Spanish regulations, which – taking advantage of the possibility of double taxation – also imposed an excise tax on the coal used for heating the power plants (“coal tax”). According to the judgement, tax must be introduced ‘for reasons of environmental policy’, where there is a direct link between the use of the revenue and the purpose of the tax in question or where that tax, in terms of its structure, including in particular the taxable item or the tax rate, is designed in such a way that it influences the behaviour of taxpayers in a manner that facilitates ensuring better protection of the environment.