Environment talks to focus on tax regime

Date: 29/02/1996

By Michael Mann

THE European Commission is renewing its efforts to breathe life into the debate on the role of taxes in protecting the environment.

But a two-day conference in Rome this June will steer clear of calls for radical reforms of EU tax systems, and concentrate instead on how “to modify existing tax regimes at the margins” to reduce environmental damage, according to Commission officials.

The meeting, under the title of Economic incentives and disincentives for environmental protection, will draw together not only EU environment ministers, but also representatives from transport and economics ministries, academics and environmental campaigners.

Environment Commissioner Ritt Bjerregaard's officials stress that far too many direct and indirect tax measures exist in different industrial sectors which have a negative environmental effect. “What we are looking at is inserting environmental considerations into existing taxes, not trying to force through eco-taxes,” said an official.

Rules in several countries allowing businesses to deduct car expenses from income tax are a classic example of counter- productive measures, say Commission officials, pointing out that, as often as not, these cancel out environmental benefits from tax incentives for the use of 'greener' fuel.

The lion's share of the meeting will be taken up with discussions relating to the environmental impact of taxes on transport. It will look, for example, at the potential for two-tier tax systems for “clean” and conventional fuels. Such a policy has already been put into practice through price differentials for leaded and non-leaded petrol, and higher road taxes in some countries for cars not fitted with catalytic converters.

The meeting comes at a crucial stage, following on from Transport Commissioner Neil Kinnock's recent Green Paper on Fair and efficient pricing in transport, Bjerregaard's own paper on carbon dioxide (CO2) emissions from cars, and with the findings of the 'Auto-Oil Programme' due in the next two months and initiatives on mineral oil excise duties also possible within the next year.

It also comes in the wake of a new study from the Centre for Energy Conservation and Environmental Technology which shows that car fuel prices are 20&percent; lower in real terms than in the early Eighties, while the price of public transport tickets has trebled in some cases.

The pressure group Transport and Environment has renewed its call for an increase in the tax on motor fuels to help the EU attain its CO2 stabilisation targets.

“Every year of inaction leads us further away from reaching the emission reduction targets and internalised costs. Meanwhile, car use, nuisance and pollution soar and public transport users get to bear the financial burden,” said T&E director Gijs Kuneman.

But officials remain wary of any talk of relaunching the debate about EU-wide eco-taxes at this stage, “although they are part of the debate”. One official stressed: “We're not looking at revolutionary ideas at the moment, but at how we can turn tax regulations at the margins. We have to remember that the basic function of tax remains to raise revenue for the state.”

The meeting scheduled for 8 June will be preceded by an experts' session, which the Commission hopes will bring together experts from “all interest groups, business and NGOs, from all parts of the political spectrum and all regions of the Union”.

The move reflects a growing recognition within the Commission that there is a need for cooperation between different departments, “ideally leading to some sort of common position”.

Last month, the Green Group in the European Parliament hosted a conference aimed at injecting new life into the Commission's proposals for EU-wide CO2 taxes, which were all but killed off by strong resistance from the UK, Ireland, Portugal and Greece.

Green groups are awaiting the Commission's communication on member states' use of green levies, due out this spring. Their campaign received a boost at a recent informal meeting of EU environment ministers in the Hague, where eight countries jointly urged the Commission to resurrect the policy initiative.