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(Bloomberg) — The European Union is developing plans to cut taxes on renewable energy and make electricity systems more flexible as high costs continue to weigh on the region’s economy.

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The European Commission plans to propose a new regulation next month that introduces goals for smart meter adoption and tax changes designed to promote clean energy, according to a draft document seen by Bloomberg News. The Middle East war has pushed energy to the top of the EU political agenda as concerns mount over the economic fallout from higher power bills.

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“This proposal addresses concerns on rising energy costs, since they are driven not only by high and volatile prices but also by rising system costs,” the bloc’s executive arm said in the document.

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The plan reflects the EU’s drive to shift away from oil and gas to homegrown, renewable energy. While the region has boosted the use of sources such as wind and solar, it is still dependent on imported fossil fuels for 57% of energy consumption. The price hikes resulting from the Iran conflict are boosting Europe’s import bill by 500 million euros per day, according to commission estimates.

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To accelerate the energy transition, the EU wants the minimum level of excise tax for electricity to be lower than that of natural gas. It also seeks a targeted option to reduce power taxation for energy-intensive industries, which have long warned that high energy bills undermine their ability to invest in the region and put plants at risk of closure. 

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The proposal is to be unveiled next month alongside an electrification strategy for the EU, which has the world’s most interconnected grid but needs massive investments to modernize it. The commission wants to make networks more flexible and avoid costly curtailment — a practice where producers of renewable energy are forced to shut down plants on sunny or windy days because there’s more electricity than the region can use. 

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“Users of the grids should be incentivized to behave in a system-friendly way, adjusting their energy use or shifting it towards times and places where the cheapest energy sources are available and when it is the most cost efficient for the overall system,” the commission said in the document.

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The regulation would introduce a minimum EU-wide deployment obligation for smart meters to ensure that at least a half of final customers in each member state are covered by such a system by the end of the decade. The goal for adoption rises to at least 65% in 2033.

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The draft regulation may still change before adoption. The commission declined to comment.

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