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EU energy tax proposal emerges
ENDS Environmental Daily Thursday, March 13, 1997 The European Commission has proposed a directive to harmonise and gradually increase EU taxation of energy products. The proposal aims to pull off a difficult triple act: "Without introducing a new tax", says the Commission, the proposal "continues to pursue the objectives of the internal market, of greater respect for the environment and of combating unemployment."
The proposal is less ambitious than the Commission's ill-fated carbon tax, which, in part, it is designed to replace. But it can still expect a hard ride from opponents in national governments and industry, and may not be finally agreed in anything like its present form.
Even its formal adoption by the Commission has surprised some observers. Just a month ago, the measure was sent "back to the drawing board" by Commissioners anxious that it would damage competitiveness or increase unemployment. The Commission's aim is to harmonise and widen the range of EU minimum tax rates on energy products from 1 January 1998. At the moment, only oils are covered by EU-wide excise duties. The Commission now wants to include other fuels, principally coal and natural gas, as well as electricity. Minimum rates would then be increased in two stages in 2000 and 2002.
For most countries and energy products, the proposed minimum tax rates for 1998 would make little difference, since national taxes already exceed the levels proposed. Taxation of petrol and diesel in Greece, Luxembourg and Spain are exceptions. The Commission expects the measures would increase pump prices in 1998 by 6-11%. The rates proposed for 1998 for energy products used as motor fuel are: Ecu417 per 1000 litres of petrol, Ecu310 per 1000 litres of diesel, Ecu310 per 1000 litres of kerosene (excluding use as aircraft fuel) and Ecu141 per 1000 kg of natural gas. The Commission is proposing significantly lower minimum tax rates for heating fuels. It also proposes a minimum tax rate for electricity of Ecu1 per MWh.
Despite now having the Commission's backing, prospects for the directive look distinctly mixed. A number of governments are known to oppose it, including Spain, the UK and France. Industry groups, and particularly those representing heavy energy users, are also planning to lobby hard against it, while no similar effort appears to be planned by environmental groups.
Industry is particularly dubious about the Commission's assertion that its proposed energy taxes would be fiscally neutral. Speaking for the EU's chemical industry association, Cefic, Claude Culem said: "We're in favour of tax harmonisation, but not harmonisation upwards". "In any case", he continued, "the elasticity of energy demand is so low that it would lead to no change in demand, so we firmly believe that it is just a tax-raising measure."
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