The European Union (EU) is planning to overhaul its current energy taxation system in a bid to synchronize it with the bloc's green ambition, European Commissioner for Economy Paolo Gentiloni said on Thursday.

He noted that it was high time that the EU updated its Energy Taxation Directive which was almost two decades old and with minimum rates unchanged since 2003.

"They do not reflect the actual energy content or environmental performance of the energy sources covered. They lead to pollutant fuels being taxed less than their cleaner alternatives, which of course makes no sense. In short, the current rules are completely out of synch with our green ambitions," he told a news conference.

Gentiloni explained that the new proposal contains in-built possibilities for EU countries to relieve lower-income households from any additional tax burden while they adjust to greener energy over the coming years.

A second proposal Gentiloni presented on Thursday was the Carbon Border Adjustment Mechanism, designed to "address the risk of carbon leakage which can undermine our efforts when production is moved elsewhere to avoid EU carbon pricing."

The two proposals that reflect the "polluter pays" principle are part of a comprehensive roadmap for realizing the EU's ambitious target of reducing its net greenhouse gas emissions by at least 55 percent from 1990 levels by 2030 and to become climate-neutral by 2050.

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