The UK government has vowed to fight a European Commission ruling that could scupper its hopes for next month’s Green Deal.
The EC said in June that the UK must raise the level of VAT on energy efficiency products from 5% to 20%.
The rate was reduced to 5% on energy efficiency products to try and boost their take-up and help to reduce energy use, tackle fuel poverty and reduce carbon emissions.
But the European Commission says this breaches the VAT directive.
The directive allows for reduced VAT in several areas including water, food, audio books, restaurant service, gardening, nappies and energy itself – but not on products that will help to reduce that energy use.
This is despite the fact that the Commission itself has a policy of trying to reduce energy use and carbon emissions.
The government says the VAT ruling is irrational and has confirmed to BBC News that it will see the Commission in court, probably early next year.
The Climate Change Minister Greg Barker has started a Twitter campaign on the issue and says that rather than obstructing UK efforts, Europe should follow the UK’s example.