Electricity tax cut imminent - War with Iran spurs EU proposal
Electricity taxes could be cut under a new EU proposal to offset the impact of the Iran war on energy prices. A draft proposal from the European Commission, due to be published on April 22, outlines measures to curb energy bills. It is also expected to include plans to reduce the EU's dependence on fossil fuels to better protect member states from energy shocks.
"We are paying a very high price for our over-reliance on fossil fuels," European Commission President Ursula von der Leyen said this week, as oil prices rose back above $100 a barrel.
Natural gas prices in Europe have increased by more than 70 percent since the start of the conflict, with the Strait of Hormuz – through which about 20 percent of global oil flows – virtually closed. Since wholesale electricity prices across Europe are largely determined by the cost of gas-fired power, the increase in gas prices since the start of the conflict has had a direct impact on electricity bills.
Currently, taxes on electricity are much higher than those on fossil fuels in most European countries, despite the climate impact of oil and gas. According to Eurostat, the average price of electricity for households in the EU was around €0.29 per kWh at the beginning of 2025, while gas prices for households were on average just €0.11 per kWh – meaning electricity costs around two and a half times more per unit. Last year, almost 28 percent of the average European consumer’s electricity bill went to taxes and levies.
This gap is not accidental. In part, electricity taxes are high because governments use them to fund renewable energy and environmental policies. Historically, lower gas prices have also been intended to keep fossil-fuel-dependent heating and transportation affordable.
But as these sectors increasingly electrify, critics say this is actively discouraging the transition to cleaner energy.
The European Commission has argued that reducing electricity taxes is key to encouraging a shift away from fossil fuels. However, EU rules on electricity taxes have not changed since 2003 and efforts to change them have repeatedly stalled. In November 2025, a proposal for tax reform failed to receive the required unanimous support of member states.
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