WATCHING THE WORLD THE CARBON TAX ISSUE

With Roger Vielvoye from London The European Community's controversial proposals to stabilize carbon dioxide discharges to the atmosphere with a carbon tax continues to provoke condemnation from all shades of opinion in the oil business. The idea of a $3/bbl tax starting in 1993 and rising to $10/bbl by 2000 has managed to unite oil consumers, refiners, marketers and the Organization of Petroleum Exporting Countries in condemnation of the levy.

Oct. 28, 1991

3 min read

The European Community's controversial proposals to stabilize carbon dioxide discharges to the atmosphere with a carbon tax continues to provoke condemnation from all shades of opinion in the oil business.

The idea of a $3/bbl tax starting in 1993 and rising to $10/bbl by 2000 has managed to unite oil consumers, refiners, marketers and the Organization of Petroleum Exporting Countries in condemnation of the levy.

OPEC Sec. Gen. Subroto used the platform at the World Petroleum Congress in Buenos Aires to brand the tax a threat to free trade and a measure that would promote nuclear power.

By raising the issue of the low taxes nuclear power will pay Subroto is lining up with European environmental groups that in other circumstances might be expected to support a measure that ultimately will reduce fuel consumption throughout Europe.

EFFECT ON OIL DEMAND

OPEC has every right to be worried about the effects of the tax on its members. The Center for Global Energy Studies, London, said if the EC were successful in promoting the tax worldwide, oil demand in 2000 would be 4 million b/d less than it would have been without the levy.

Because fossil fuel burning is the major source of man-made carbon dioxide, it presents an obvious target for those charged with formulating a response to global warming. There is a danger fossil fuel industries could become convenient scapegoats, the center said.

The oil industry cannot afford to ignore this danger, said the latest edition of the center's Global Oil Report. The industry should become involved in a worldwide collaborative program to encourage adoption of broader measures that would involve all aspects of the problem.

In the face of possible discriminatory taxes against oil, the center has come up with the idea of producers and consumers contributing an agreed amount per barrel to set up an internationally administered fund to finance research on the role of oil in global warming and promote measures to discourage deforestation and encourage planning of new forests.

The only enthusiasm for the carbon tax in Europe comes from the people who really seem to count in the ECpoliticians.

AID FOR ENERGY PROJECTS

Italy's environment minister, Giorgio Ruffolo, stepped into the debate with a proposal to donate 20% of the $60 billion/year the tax will raise to fund energy projects in developing countries.

Ruffolo said in Milan his idea got a sympathetic reception from other environment ministers and will be raised at the joint meeting of environment and industry ministers in December to debate the future of the tax.

When the tax was first proposed, the EC talked about diverting all the proceeds into an international research program to improve technology for energy conservation. Adding aid for the developing world to the list of beneficiaries will certainly not damage the prospects for the tax, which will need all the support it can get to win approval by industry ministers in December.