This is the presentation delivered during the July 13th 2023 class at the Summer School in Environmental taxation at the University Federico II of Naples. It is the update of the 2022 edition.

1. Energy Taxation: the European
Framework and the Italian Strategy
Marco Greggi, University of Ferrara
Summer School in European Environmental Taxation
University of Naples «Federico II»
July 13th 2023

2. Outline of the Presentation
1. Energy Taxation: making sense of a policy strategy;
2. Excise duties: the Italian case and the European framework;
3. Trading with Energy: charging VAT and territoriality;
4. The RepowerEU plan;
5. Sources of energy: territory and beyond;
• New Italian Exclusive Economic Zone from June 9th 2021;
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3. Addressing the Scenario
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Income
tax
Value
added Tax
Excise
Duties

4. Income Taxation
• Latest development (2020 – 2021) coherent with the Masterplan “Industry 4.0” now (Transition
4.0);
• Not strictly pertinent to Energy taxation;
• Overhaul of the supply chains and production systems in Italy (and beyond);
• Legal tool used: tax credit for corporate tax purposes (Act n.187 passed in 2020, Article 1, § 1059):
• New machinery (6% - 20%);
• R&D in Green (6% - 12%);
• Credit to be used to offset tax liability only;
• Capping applies.
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5. Transition 4.0 (in a Nutshell)
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Credit: Spectral Engines GmbH

6. Any Ground for “State Aid” ?
• Article 107 TFEU:
• Not the case, as the measures enacted are neither selective, nor create
relevant distortion to the market, nor trigger the European constraints in
the matter (Italian Tax office Ruling 157/01);
• European Commission – decision C(2018)1661 final:
• Necessity to have the measure as such, cases of cumulative application with others
(such as “Earthquake recovery plans”) to be scrutinized on different grounds.
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7. Preliminary Findings (Income Tax)
• Energy taxation for income tax purposes is not ruled coherently with a long run agenda
setting conditions for the promotion in the framework of a sound financial sustainability;
• Evidence of this:
1. Measures renewed on yearly basis;
2. Tax credit used;
3. Lack of coordination with other incentives;
4. Confusion with other policies promoted (IoT, for example);
5. …
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8. Value Added Taxation and Energy
• Energy (actually, most of it) is considered as a good for VAT purposes,
although not tangible (the only exception to the VAT scheme under
directive 2006/112/EC):
• Article 14: ‘Supply of goods’ shall mean the transfer of the right to dispose of
tangible property as owner.
• (…)
• Article 15: Electricity, gas, heat, refrigeration and the like shall be treated as tangible
property.
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9. Why is It so Relevant ?
• Qualification of the asset as a “Game changer” in terms of:
• Territoriality;
• Moment in which the transaction occurs;
• Rate to be charged;
• Possibility to use special VAT regimes;
• …
• Problems on the table:
1. How can we qualify energy-related assets for VAT purposes ?
2. Literal interpretation ? Purposive interpretation ?
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10. The Nature of the Certificate
• A matter of perspectives;
• Under the MiFID II directive they are full fledged financial instruments and
have to be treated accordingly for contractual purposes (and investors
protection); see n° 11, Section C; Annex I to the 2014/65/EU Directive;
• Emission allowances consisting of any units recognised for compliance with the
requirements of Directive 2003/87/EC (Emissions Trading Scheme);
• Under the CJEU case law, they are intangibles and have to be treated
accordingly (C-453/15 A and B) December 8th 2016.
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11. Tax Regime of the Certificates
• Income / Corporate Tax:
• Depending on the domestic legislation on the case (in my country, the sale originates
taxable capital gains for the business);
• Value Added Tax:
• Their intangible nature would make them services, taxed accordingly (Article 24 and
sub., 2006/112/EC Directive);
• Case for VAT exemption (under the MiFID II qualification as Financial instruments) ?
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12. VAT Regime
• Trade of certificates (delivery of service);
• VAT Committee interpretation of Articles 4(5) and 9, 1977/388/EEC
directive (Taxud/1625/04 – Working Paper n.443);
• Transfer of greenhouse gas emissions certificates (Article 12, 2003/87/EC) when
made for consideration by a taxable person is a taxable supply of services falling
within the scope of Article 9(2)(e) of the 77/388/EEC directive;
• None of the exemptions provided for by Article 13 can be applied to this transfer of
allowances.
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13. Key Findings
• European Union introduces a special VAT regime for the certificates but
with a different understanding of certificate as under the MiFID system;
• Reasons of this inconsistency:
• Neutrality of the Tax;
• Better compliance in term of invoicing with the exclusion of possible pro rata
mechanism;
• Sectional purpose of the MiFID system.
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14. Real-Life Case
• Italian Supreme Court decision on October 10th 2019, n. 25492;
• Purchase of Co2 Emission Trading Certificates by an Italian Company from a French one;
• Strategy of the taxpayer:
• VAT charged in reverse with a 10% (discounted) rate;
• Why ? The certificate in ancillary to the production of energy, therefore qualifies fort the same
rate;
• Reaction of the Office:
• No such ancillary nature occurs;
• Rate should be 20% (Ratione temporis).
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15. Conclusions
• No connection exists in cases like these;
• Emission Certificate has been introduced under Article 3, directive 2003/87/EC
implemented in Italy as the right to produce 1 Ton of Co2;
• They are not bonds and they have no value until the are traded;
• Legal nature unclear: arguably intangibles (financial instruments) and treated as such;
• Therefore:
• They are to be taxed as services;
• They are not ancillary to the good (energy) they are traded for.
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16. Preliminary Findings (VAT)
1. VAT system is more robust as to taxation of energy and coherent in
this respect if compared to income taxes;
2. Incentives are granted via discounted rates, where applicable;
3. Energy is normally considered as a good and treated accordingly.
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17. Excise Duties
• Single-stage taxes charged on production (or consumption) of selected goods;
• Their application and adjustment is suitable for tax strategies inspired by Pigou
(or, in some respect, Thaler);
• Article 113 TFEU demands their harmonization in the Union has to grant the
proper functioning of the market;
• Priority to oil (and derivatives), alcoholic beverages and tobacco;
• First directive (framework) 1992/12/EEC.
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18. Excise System in Italy
• Second phase of harmonization, with a specific focus on energy (2003/96/EC);
• Necessity to grant a minimum level of taxation in the continent and to act consistently
wit the Kyoto Protocol;
• Nature of Excises: Excises are taxes on consumption, not on the sale / production, hence the
moment in which they are actually charged should be as close as possible to the final consumer
(CJEU C-355/14 June 2nd 2016);
• Italy largely compliant with the European model (T.U.A. -legislative decree- October
1995, n. 504);
• Significant leeway: audit, litigation, fines application.
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19. Preliminary Findings
(Excise Duties)
• Excises duties as the most suitable legal tool to enact energy taxation
policies, due to the fast reaction of the market;
• Yet some critical aspects seems to emerge in the daily application, these
might include:
• Necessity to deal with cumulative application (with VAT);
• Necessity for a more effective policy of incentives and duties reduction;
• Urgency to make sense of over-arching EU principles applicable irrespective of
directives’ loopholes (proportionality in charging fines, rule of reason).
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20. The Agenda for the Years to come
• PNRR and Energy taxation:
• Focus on Hydrogen, infrastructure, storage facilities, and sustainable mobility;
• Action M2C2 (page 127) set the guidelines in this respect:
• Hydrogen management and disposal with a specific excise to be charged / adjusted ?
• Need to consider Lithium shortage for the production of batteries;
• Number of issues going beyond the understanding … of the tax lawyer.
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21. The European Green Deal
• A changing Scenario between 2019 and 2022;
• Overhaul of Energy taxation (directive 2003/96/EC);
• Abolition of exemptions and incentives granted (defragmentation of the Excise
system);
• New Taxation system of Transports and logistics;
• Taxation “from work to pollution”;
• New VAT rates.
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22. The New Energy Taxation
• Qualitative discrimination “from volume to energy content taxation”;
• Four fuel clusters and pertinent rates to be charged (environmental
performance):
1. Conventional fossil fuels (oil, gas, …);
2. Fossil-based fuels (less harmful) (gas naturale, GPL, …);
3. Sustainable-but-not-advanced biofuels;
4. Electricity and Advanced renewable fuels.
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23. An Impact Assessment
• Extension of the excises system might lead to:
• Increase in number of taxpayers;
• Overtake of the traditional oil supply chain and the need to assess new chains for the delivery of the latest products;
• Increase of the compliance throughout the supply chain.
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Source: Ministry of Economic Development

24. Taxation of Transports
and Logistics
• European Green Deal (at § 2.1.5) promotes all kind of multimodal
transport (from wheels to rail) via:
• Energy Taxation;
• Progressive repeal of tax incentives to transport;
• Application of the ETS system to logistics and transports
• Potential issues concerning territoriality ?
• Any room for more traditional solutions ?
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25. Port Fees and Taxes
• Proposal: calculation of the
Port/Docking fees according to
the destination of the goods
(art. 2 d.P.R. 107/09);
• The best environmental taxation
begins outside the EU;
• Use of already known means of
taxation;
• Optimization of logistic
compliance.
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26. Energy Taxation and
the Repower EU Plan
• Repower EU Plan tabled on May 18th 2022 due to the war in Ukraine,
with COM(2022) 230 final;
• Investment on renewables;
• Improvement of Common Storage Systems for energy;
• Implementation of a EU-wide Grid for the Energy supply;
• Activation of Centralized Purchase Centres;
• A sort of “Silk road project” in reverse ?
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27. From Policy to Tax Law
• At the edge of tax lawyers’ expertise;
• Old tools for new issues (VAT regime and VAT rates) ?
• European Common Infrastructure and European Storage Centres
taxing energy via withholding taxation in the future ?
• Possible creation of withholding agents ?
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28. Some new Ideas:
the Production Sharing Agreements
• «PSA is an arrangement between government and one or more investors
which governs mineral resources exploration and production rights. The
investors are to implement all specified works at their own account and
risk. The procedure of output allocation between contracting parties is also
set out in the PSAs.» (Russian Federal Law. 30 december 1995, n.225);
• Special Tax Regime: the permanent establishment case;
• Agreement features.
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29. A Blueprint for the next PSA ?
• A triangular approach to the next PSA:
• European PSA (those involving European MNEs) have to take into account the
negative externalities the resources extracted might produce;
• National Governments (and the EU) should be in the position to intervene as
to assess the adverse impact on the environment;
• Downfalls: asymmetric impact, alteration of the competitive price-
making.
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30. Production of Certificates
beyond the Threshold
• Certificates assigned via auction-based mechanisms and market
negotiation;
• Perspective: certificates creation by the businesses via proactive strategies
/ positive externality for the environment;
• Strategy pursued in Italy by farms and business with equipment capable of capturing
CO2 emissions and calculate them (Ruling 3465/E September 16th 2020);
• Preliminary findings: business not yet allowed and unrelated to farming.
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31. The New Italian Exclusive Zone
• The expansion of the Exclusive Economic
Zone and the possible consequences on
the sources of energy (200 miles off the
coast);
• Final approval on June 9th 2021 by the Italian
Senate;
• The Zone is consistent with the UN
Convention of Montego Bay of December
10th 1982.
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Source: Limes 2021

32. Charging VAT in the EEZ
• EEZ is part of the European territory under Article 335 TFEU ?
• No express reference to it;
• VAT Committee WP 846, February 19th 2015: opinion on
Article 398 2006/112 Directive;
• VAT charged anyway;
• CJEU C-111/05 Aktierbolaget NN, March 29th 2007 (§§56 –
59);
• Delivery of service out of the scope of VAT (circumstances of the
case matter !)
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33. Charging Income Tax in the EEZ
• The issue of the off-shore permanent establishment
• Art. 16, § 2, Lett. (f) Italian Income tax Act;
• OECD Model Convention article 5;
• …
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34. Thanks for Your Attention
marco.greggi@unife.it