Fossil fuel subsidies to face tighter EU scrutiny

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BRUSSELS, Jan 31 (Reuters) - The European Commission wants to increase scrutiny of whether countries are phasing out fossil fuel subsidies fast enough to meet climate goals, under EU rules due this year.

EU countries spent 56 billion euros on fossil fuel subsidies in 2019, with 15 states spending more on fossil fuels than green energy, the European Court of Auditors said in a report on Monday.

The Commission has said such support must end, since they undermine policies to tackle climate change, including the EU's target to reduce net emissions 55% by 2030 from 1990 levels.

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The auditors said that during their review, the Commission confirmed it will adopt legislation in 2022 setting out how member states must report progress towards phasing out fossil fuel subsidies. The rules would apply from 2023.

Most fossil fuel subsidies in EU countries are tax cuts or exemptions. EU tax rules also mean highly-polluting fuels such as coal face lower levies than some cleaner alternatives or electricity.

"More polluting sources of energy may have a tax advantage compared to carbon-efficient sources of energy," the auditors said.

Brussels last year proposed an overhaul of minimum EU tax rates, to favour clean fuels over the dirtiest and least energy-efficient. Fossil kerosene, for example, would lose its EU tax exemption while coal, gas and heavy fuel oil rates would rise.

The EU also upgraded its competition rules late last year to make it less likely that fossil fuel subsidies would be approved by Brussels. read more

EU tax changes, however, need unanimous approval from EU governments - a daunting political threshold since each country has a veto. Some countries have resisted other planned EU measures to impose costs on polluting fuels, fearing the social fallout if they increased household bills. read more

The auditors said social acceptance of such measures could be aided by cutting other taxes, or using the money raised to compensate affected households.

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Reporting by Kate Abnett; editing by Grant McCool

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