New Labour refuses to go full Monti on energy taxation

The European Parliament this week rejected it's own Economic Committee's project to simplify and strengthen the Commission's "Monti proposal" on harmonised energy taxation, due to a last minute U-turn by some British Labour MEPs.

The Monti proposal envisages an excise style tax to be applied to coal, natural gas and electricity and an increase in duty on fuel, across. Commission forecasts estimate that the new taxes will increase GDP across the Union between 0.02 and 0.20%, create between 155,000 and 457,000 jobs, result in a drop of CO2 emissions in the order of 0.5 and 1.6% and produce a similar fall in emissions from other pollutants.

On behalf of the EP’s Economic Committee, Liberal MEP Pat Cox said the Commission’s proposal seemed to contain more exemptions than basic rules, and to give too much emphasis to the priorities of lobbyists in each sector. Such at tax, he said should be “Simple to understand, easy to collect, predictable and difficult to evade.”

The proposed amendments would have increased the tax base by reducing exemptions, increased the rate of tax and proposed fiscal neutrality.

Pat Cox told edie the Monti proposal included pages of blanket exemptions from the tax, which was not compatible with a serious approach to green taxation. Instead, the Economic Committee is proposing to delete all blanket exemptions except for green exemptions such as windpower, hydropower etc. But recognising the potential adverse competitive effects on some heavy energy users, those affected would be able to negotiate for a reduction or exemption if they could prove the harm to their competitiveness.

Also, rather than re-negotiating the rate of the tax every two to three years, Cox proposes an “accelerator principle”, that would automatically increase the rate by 2% above the Euroland inflation rate for the first five years.

While many of the amendments were approved, the Parliament ended up rejecting the amended proposal by 24 votes. Cox says that this was due to a last minute U-turn by some British Labour MEPs, who took exception to one of the amendments that had been inserted by the socialists. He intends to get the amendments through Parliament before the June elections, by retabling the report without the one amendment that caused offence. Cox told edie he is optimistic that the Council of Ministers will back a “greener Monti”, particularly given the German Presidency’s enthusiasm for green tax reform.

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