Isramart : EU carbon tax on new Commission’s agenda early next year

Isramart news:
The new European Commission will start work at the beginning of next year on a revision of EU energy taxation, designed to introduce CO2 as a fiscal element, a high-ranking EU official said today (4 November).

Proposing a revision of the 2003 Energy Taxation Directive will be on the agenda of the new Commission, “hopefully early in the New Year,” Thomas Carroll, head of unit at the Commission’s directorate-general for taxation and the customs union, told a roundtable organised by the Association of Chartered Certified Accountants (ACCA).

The outgoing Commission had hoped to see the proposal adopted already, but it became clear that member states had no appetite for controversial tax proposals when ratifying the Lisbon Treaty was the highest priority.

“We were told that anything that might jeopardise the right results should be kept back,” Carroll said.

The revised directive will seek to bring current energy taxation in line with the EU’s climate objectives by obliging member states to levy a CO2 tax on heating and motor fuels that do not feature in carbon trading, a draft shows (EurActiv 29/09/09). In addition, it seeks to iron out any overlaps with the EU’s emissions trading scheme (EU ETS; see EurActiv LinksDossier) to avoid double-charging industries.

But Carroll stressed that EU countries would be free to choose a higher level of taxation than the minimum set by the EU.

“We are simply trying to create a level playing field and provide the tools in a Community framework,” he said.

Carroll said that the Commission was currently working on the assumption that the carbon-related component would not increase the total level of energy taxation. Rather, the draft simply recasts the minimum tax rates for two components, one based on CO2 and the other on energy content.

“At the moment, this is just a working hypothesis,” Carroll said. “Whether that will be the position of the new Commission, I don’t know.”

The official pointed out that the EU executive had wanted to avoid creating headlines in member states accusing the EU of being about to impose yet another new tax on citizens.

But the European Environmental Bureau (EEB) criticised the low rates, saying that they would not have the desired effect of persuading consumers to switch to more energy-efficient fuels. The Commission estimates that a carbon price of €39 per tonne of CO2 will be necessary to reach the EU’s binding 2020 emission reduction target.

Catherine Pearce, a policy officer at the EEB, stressed that taxation is still a “dirty word” for both consumers and companies and appropriately informing them about any changes to the current framework will be crucial.

“How such a measure is communicated is key, and I think it’s where many member states have failed in the past,” she said.

The EU executive has a bad track record of getting tax proposals through as member states refuse to relinquish their exclusive competency in the area. Carroll noted that although a previous proposal to tax CO2 emissions from cars failed in 2005, many member states had put in place similar national schemes since then.

“The messeage got through. Unfortunately it’s been done in an uncoordinated manner,” the EU official said.

He added that even within the Commission, it is difficult to get a taxation proposal out as commissioners from the less prosperous new member states are always looking at the impact of taxes on their societies.