EUROPEAN ENERGY TAX PROPOSAL ADVANCING

A controversial proposal for a European energy tax equal to $10/bbl of oil by 2000 has made its first significant moves toward becoming official European Community policy. The tax is seen by its proponents in EC as a means of meeting the organization's commitment to stabilize carbon dioxide emissions at 1990 levels by the end of this century. The tax, based in part on the carbon content of fuels, would start in January 1993 with a $3/bbl levy and rise by $1/bbl/year to the $10/bbl maximum.

Oct. 7, 1991

2 min read

A controversial proposal for a European energy tax equal to $10/bbl of oil by 2000 has made its first significant moves toward becoming official European Community policy.

The tax is seen by its proponents in EC as a means of meeting the organization's commitment to stabilize carbon dioxide emissions at 1990 levels by the end of this century.

The tax, based in part on the carbon content of fuels, would start in January 1993 with a $3/bbl levy and rise by $1/bbl/year to the $10/bbl maximum.

Late last month, the European Commission recommended that the tax become official EC policy. It has now tacit approval by environmental ministers from the 13 member states.

Finance ministers from the 13 members will discuss the fiscal implications of the tax at a meeting this week.

A final decision on whether the commission, EC's civil service, is asked to turn the tax proposals into directives that would be binding on all member states will be made by environmental and energy ministers in December.

TAX ELEMENTS

The tax will have two main elements.

All nonrenewable fuels will be taxed according to their energy value, with fossil fuels rated according to their carbon content.

Energy intensive industries such as steel, chemicals, and cement will be asked to make voluntary reductions in energy consumption. They will be allowed tax breaks to allow them to compete with similar industries in countries without such a tax.

SUPPORT, OPPOSITION

The tax is not certain to progress beyond next December's ministerial meetings.

While Germany and Denmark are anxious to promote energy conservation as a weapon against increasing CO2 emissions, a number of other influential EC members are strongly opposed.

France is leading this opposition. It generates most of its electricity from nuclear power, giving it the lowest CO2 emission rate in Europe.

A number of influential trade organizations also have joined forces to oppose the tax. In a joint communique, organizations representing the petroleum, chemical, cement, automobile, and nonferrous metal industries said there would be severe economic and social consequences from any unilateral decision to impose the tax. The competitive position of European industries would be weakened.

Instead, the communique urged EC to press for concerted international action that would cover all industrial countries inside and outside the EC.