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European Commission President Ursula von der Leyen
The European Commission has previously voiced concerns about Hungary’s utility cost reduction policy. However, its latest country-specific recommendation takes a different approach, describing the measure as a fossil fuel subsidy that should be phased out, Magyar Nemzet reports.
“In Hungary, subsidies for fossil fuels—such as the program to reduce utility costs, the reduction in the VAT rate for natural gas-based district heating, and the excise tax refund for the agricultural use of diesel fuel—are economically inefficient; they entrench dependence on fossil fuels and do not promote electrification. The objectives pursued with the aforementioned fossil fuel subsidies can be achieved through alternative forms of support that do not entail harmful external environmental effects,” the document states.
This somewhat peculiar bundling of subsidies was likely necessary because the European Commission actually has no means to prevent the reduction of utility costs. As one may recall, Brussels has criticized the measure on several occasions, yet the regulation of energy prices for private households is not prohibited in the EU per se. Several member states implemented crisis measures during the 2022–2023 energy crisis. This is likely also the reason why the infringement proceedings threatened for 2025 were not initiated.
However, the reduction in utility costs cannot be challenged under the framework of traditional state aid procedures, as it does not constitute state aid to a specific company but rather a broad-based price regulation for private households.
From the outset, the reduction in utility costs has served the goal of making the population independent of market-based energy prices.
The benefits of this were particularly evident during the 2022 energy crisis, when bills skyrocketed in Western Europe, while in Hungary, the discounted rates were maintained up to the average consumption level.
In recent years, the European Commission has spoken out against reducing utility costs, as this does not distinguish between consumers in need and those who are better off. Therefore, the Commission proposed socially oriented compensation instead of a general measure. According to statements, the TISZA government is moving in this direction.
Energy storage facility at MVM’s gas turbine power plant in Litér. Photo: MTI/Vasvári Tamás
The Commission’s stance can be inferred from its earlier statements: If the state keeps natural gas prices permanently low, people have less incentive to replace their gas boilers, insulate their homes, or switch to electric heating. Incidentally, this theory is only partially true; a glance at the popularity of tenders for energy-efficient renovations suffices.
However, one must also recognize that since the Russia-Ukraine war, the European Union has given high priority to reducing dependence on natural gas, and in particular to reducing Russian imports. Electrification—heat pumps, electric heating, and electric mobility—has long been more of a political tool than part of a purely green ideology.
For this reason, it is pointless to push Hungary toward electrification in this way since gas consumption cannot currently be replaced by electricity—as even our current electricity consumption can only be met through substantial imports.
Furthermore, there is a shortage of electricity generation capacity across Europe, meaning that if all single-family homes were to replace their gas boilers with heat pumps, there would be no way to meet the electricity demand.
One of the pillars of Hungary’s energy strategy is the expansion of electricity generation capacity—the development of the Paks II project, solar power generation that performs exceptionally well at the European level, and investments in gas-fired power plants—but these are not yet complete, and until then, it would be risky to encourage an increase in electricity consumption.
The construction site of the Paks II Nuclear Power Plant on February 5, 2025. Photo: MTI/Máthé Zoltán
It remains unclear how the abolition of the excise tax refund for the agricultural use of diesel fuel is intended to promote electrification. While electric tractors do exist, they are smaller in size, making them currently unsuitable for energy-intensive, long-duration field work. As things stand, this aspect of the Commission’s proposal would primarily lead to a further increase in costs for Hungarian agriculture and thus to a deterioration in its competitiveness.
Via Magyar Nemzet, Featured image: Alain ROLLAND Copyright © European Union 2025 / EP
The post Brussels Is Attacking the Reduction in Utility Costs with New “Arguments” appeared first on Hungary Today.
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