This area of the project examines how European Union tax policy can support climate and environmental objectives while maintaining economic competitiveness and social fairness. This area focuses on the design of behavioural taxes, the alignment of energy and carbon taxation with the new EU Emissions Trading System 2 (ETS2) and the coherence and equity of carbon pricing instruments across the EU framework.
The analysis identifies best practices and common challenges in reforming environmentally harmful tax expenditures and designing fiscal tools that support the Clean Industrial Deal. It also provides a quantitative assessment of how tax incentives influence innovation and sustainability, particularly in relation to carbon pricing mechanisms.
In addition, the analysis explores the interaction between existing energy and carbon taxes and the EU ETS2 in the transport and building sectors, with the aim of identifying adjustments that can strengthen policy coherence. It also assesses how carbon taxes can be designed to align with EU climate objectives, limit risks to competitiveness and reduce regressive effects on households and businesses.
Based on these findings, the project delivers evidence-based policy recommendations to support the alignment of national tax measures with the EU’s broader climate strategy.