Differentiations in value added tax (VAT) rates and VAT exemptions are used to pursue environmental policy goals, among other things. This article analyses the compatibility of such environmental VAT measures with European Union (EU) state aid law. It is found that the criteria for the granting of a fiscal advantage to (certain) undertakings and the liability to (threaten to) distort competition and affect intra-Union trade are typically fulfilled in these situations. Conversely, the qualification of the relevant advantage as ‘state’ aid (as opposed to Union aid) essentially depends on the (voluntary or mandatory) character of the advantage according to the EU VAT Directive. In any case, one could argue that aligning the VAT legal framework with the European Green Deal is now an additional objective of EU VAT law. Such a reading would speak against the selectivity of these environmental measures pursuant to the Court of Justice of the European Union’s (CJEU’s) established three-stage assessment.