Phasing out fossil fuel subsidies while ensuring European competitiveness, mitigating the cost-of-living crisis, and promoting a just transition

Key points

The EU Youth Test at the EESC was applied to this opinion. European Youth Energy Network was chosen by a group of interested youth organisations to represent all of them during the opinion-making process.

The EESC:

• is of the opinion that the phase-out of fossil fuel subsidies (FFSs) must be part of a broader tax and policy package, tailored to individual Member States. It should involve broad and inclusive social and civil dialogue to assess whether compensation schemes supporting low-carbon transitions should be introduced and, if so, which ones. The most environmentally and socially harmful FFSs should be phased out first. Untargeted subsidies should be removed, while targeted subsidies, based on household income or enterprise vulnerability, where needed, may be phased out more gradually and replaced by incentives for decarbonization;

• recommends that the European Commission (EC) clarify in detail – in the country-specific recommendations under the European Semester – the actions Member states need to take to phase out FFSs as quickly as possible;

• suggests that the EC, in partnership with stakeholders and the EESC, should set up an open, multi-stakeholder exchange platform, including civil society actors, for the Member states to share best practices on FFSs phase-out measures and programmes;

• recommends that protection mechanisms for jobs and working conditions should be put in place;

• calls on the EC to propose a clear definition of FFSs in the revision of the Energy and Climate Governance Regulation, which is based on the IMF’s system and therefore also includes indirect subsidies. Also, the EC should refine its reporting on FFSs by not only tracking statistics but also highlighting best practices for phasing them out;

• emphasises that the revision of the Energy Taxation Directive (ETD) is a critical opportunity to support the FFSs phase-out in the EU and is worried about the delays in closing this file and therefore calls on the European Parliament to adopt a position on the ETD revision as soon as possible;

• highlights that as part of the UNFCCC process, the EU should continue to uphold the vision of an FFSs phase-out globally, to promote a level playing field for European companies and speed up decarbonisation, strengthening partnerships and mutual learning strengthening partnerships and mutual learning;

• calls to remove permanently all forms of financial support for new fossil fuel infrastructure across the totality of funding instruments under the 2028-34 multiannual financial framework. We instead recommend earmarking R&D funding for clean fuels, in line with the EU Taxonomy;

• recommends revising the State aid rules to help speed up the energy transition by no longer granting State aid support for fossil fuel-based energy projects.