EU: energy tax proposals approved by Parliament at second attempt

This week MEPs approved a Commission proposal designed to pave the way for the introduction of a European energy tax, with numerous amendments, including provisions intended to promote renewable energy.

One amendment approved concerns possible exemptions such as products made from sources using renewable energies and other environmentally friendly goods. Parliament also added energy used in local public transport as a possible exemption and included a provision that would allow the member states to refund taxes on industries where a case can be made that it is causing a serious competitive handicap.

Parliament also proposed amendments to increase the proposed levels of taxation and ensure they increase at two percent above the rate of inflation. However, these were rejected by outgoing Commissioner Mario Monti.

MEPs also voted that Member States should be encouraged to apply other parameters, notably carbon content, to their national systems of energy taxation without the consequent differences in fiscal treatment being in breach of the rules of the single market. And that the minimum levels of taxation applicable to energy products other than renewable sources of energy must be increased constantly in real terms.

Parliament noted that while EU countries are bound by international agreements to keep aviation fuel exempt from taxation, this is not consistent with an environment-friendly fiscal policy. It called upon the Commission to seek an abolition of this exemption in future agreements and to propose alternative proposals to taxation of aviation fuels no later than 1 June 1999.

Parliament’s rapporteur, Patrick Cox ( ELDR, Irl), introduced his report by pointing out that all fiscal measures must be simple to collect and difficult to evade. Further more he insisted there should be fiscal neutrality which could be ensured by a corresponding reduction of the tax burden on labour. He pointed out that starting from the polluter pays principle, he has radically revised the exemptions system rendering it much simpler.

A number of speakers did not however share this opinion. In particular Maria Teresa Estevan Bolea (EPP,ES) speaking on behalf of the energy committee pointed out the difficulty that European business already had in competing with the US and Japan because of the high cost of energy. Increasing the fiscal burden would in her opinion, only exacerbate matters. The job creation potential of these measures she said was negligible and she could not recommend support of the report.

The amended proposal now goes to Council which can only reach agreement through unanimity.

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