Officials to debate the politics of energy tax

Date: 10/04/1997

By Tim Jones

THE European Commission's proposals to tax energy products could fall at the first hurdle when member states' top taxation officials meet to discuss them next week.

The Dutch EU presidency has called the meeting next Monday (14 April) to debate the merits of the proposed directive from Internal Market Commissioner Mario Monti.

The aim is to see whether there is any purpose in even continuing discussions on the proposal, given the EU's long history of debating energy taxes to no end.

“Instead of spending a lot of time on technical details and then finding it is impossible to get the directive through later, they have pressed instead for a first run-through of the political aspects of the proposal,” said one diplomat.

So far, the signs are not promising.

When Monti presented the plan to finance ministers last month, they reacted as they have always done since the Commission first suggested common taxes on energy use in 1992.

“Next week, we will see the same positions but set out in more detail,” said a diplomat.

Ever since the idea of an energy tax was first mooted to help stabilise carbon emissions at 1990 levels by the end of the century, member states have remained in the same camps.

The UK government is opposed both to the principle and the details, and has long found support from Ireland, Spain, Greece and Portugal.

Those most in favour of an energy tax are Denmark, Sweden, Belgium, Austria, Germany and the Netherlands.

When the original idea was killed off at the EU's Essen summit three years ago, the Commission had to go away and think again.

Its latest effort is being presented as an internal market measure. Minimum rates set for mineral oils five years ago would be upgraded in three phases from 1998-2002 and applied to coal, natural gas and electricity; while three bands of rates would be applied to motor and heating fuels.

Electricity consumption would also be taxed, although member states could impose higher rates on the production of 'non-environmentally desirable' fuels and offer rebates for 'environmentally preferable' ones.

But getting agreement on the plan within the Commission was far from easy and while EU officials believe the new approach could pay dividends, they also warn it will raise extra problems for some member states.

For example, Paris, which had called for the Commission to try the excise duties approach, is concerned about the extension of minimum rates to energy produced by 'non-polluting means' because this would affect its huge nuclear sector. The pro-tax Netherlands is worried about hitting natural gas.

But the Nordic countries remain hopeful. “It is just possible that some member states will be able to accept the extension of tax to new products so long as the rates are reasonably low,” said one diplomat.