The Commission will on 28 March present ideas for “green taxes” to save energy and cut greenhouse gas emissions. It says that such an ‘ecological tax reform’ could increase the bloc’s competitiveness by shifting the burden away from labour taxes.
EU heads of state and government, meeting in Brussels on 8-9 March 2007, committed themselves to reducing European CO2 emissions by 20% by 2020 compared with 1990 levels – a bold promise, when one considers that Europe is already struggling to meet its current target, under the Kyoto Protocol, of cutting these emissions by 8% by 2012.
Currently, the EU’s principal tool to reduce emissions is its carbon trading scheme, but the EU will have to find new ways to discourage pollution if it is to reach its ambitious goal.
Taxation could provide an answer as it can be used to orient producers’ and consumers’ behaviours to non-environmentally friendly goods.
Already, Europe has set minimum fuel tax rates that are a good deal higher than in the United States, making fuel at the pump more expensive and to the marketing of cars in the EU that are on average 30% more fuel efficient than in the US.
However, many member states, including the UK, Ireland and many of the Central and Eastern European countries, remain reluctant to give up their sovereignty in the field of taxation – and any move at EU level would require unanimity-backing from all 27 EU nations.
Policymakers, experts and stakeholders came together on 19-20 March 2007 at the Brussels Tax Forum in order to discuss ideas on taxation for sustainable development.
Despite member states’ resistance to impose common taxes at EU level, the Commission and the German Presidency are looking to get all 27 nations on board by convincing them that such a move is essential to the fight against climate change.
The global warming argument has worked in the past. In 2005, the idea of a common European energy policy was practically unheard of. But, by putting the main focus on the need for Europe to take the global lead on climate change – and with a little help from Russia in stressing the need for Europe to secure its energy supplies – the EU got itself a brand new common energy policy in under two years.
The Commission now hopes it can convince member states to introduce ecological taxation – a move already made by Germany back in 1999.
The Commission has already made a start, proposing that minimum duties on commercial diesel fuel be raised in order to stop trucks adding to pollution by taking detours to fill up their tanks in the cheapest countries.
Carmakers are also calling for a harmonised EU tax system; based on cars' CO2 emissions, which they say could tempt consumers to buy greener vehicles, lowering car-fleet average emissions by 5%.
EU Tax Commissioner László Kovács said that taxes had the capacity to steer the bloc's 500 million consumers toward a more efficient use of resources, while at the same time recycling the revenues back into the economy.
He added that there is a real scope for action in this field: “The tax that the public is most inclined to pay is environmental taxes, because they do understand that what is at stake is the future of mankind…Even governments are inclined to give preference to taxing pollution and consumption because to lower the tax on labour would certainly result in a higher level of competitiveness.”
German Economics Minister Peer Steinbruck said: "The Commission needs to look at tax issues over the whole of the EU," adding that work on harmonising energy taxes across the EU should be accelerated. "We think it's possible to create jobs and protect the environment," he said.
"The political stage and citizens…are more and more confronted to the consequences of the changing climate and of environmental pollution. So, I think the understanding and the willingness to pay for it increased. And in the meantime, a lot of our industries made the experience that to offer highly technology-oriented projects and procedures is a factor of higher competitiveness," he said.
"Market-based instruments are the most direct and simplest way to make the polluter pay," Environment Commissioner Stavros Dimas said, adding "There is a logic for action at EU level."
Jacqueline McGlade, executive director of the European Environment Agency (EEA) said "Ecological Tax Reform can help us to realign a European economy that is still characterised by an insufficient use of labour resources and an excessive use of natural resources."
Business has cautioned that higher taxes could damage the European economy's ability to compete on the global market.
