Spain and Ireland block EU energy tax

The compromise proposal was aimed at providing guidance to the further work to be carried out on the draft Directive on energy taxation.

At the last Ecofin meeting in March, a majority of Member States considered a Community framework for energy taxation necessary to improve the functioning of the Internal Market and to achieve environmental objectives, but some states feared that the economic effects of the proposal would raise fundamental problems.

In order to overcome these problems, the Presidency’s compromise proposed a number of transitional periods for some Member States, and exemptions or reductions in the level of taxation of certain products, including the possibility of zero rates.

The framework would cover both energy products which are not yet covered by Community Excise legislation: natural gas, coal, lignite, electricity, as well as those already covered: motor fuels and heating fuels.

Ministers’ interventions showed that 13 delegations could agree with the basic features of this compromise proposal, on the understanding that further work had to be carried out on specific questions before reaching an agreement on a final draft aimed for the end of the year. Two delegations could not accept the Presidency compromise as a basis for further work, and since unanimity is required, they can effectively veto its progress.

UNICE reiterates opposition

This week the Union of industrial and Employers’ Confederations of Europe (UNICE) also reiterated its “profound opposition” to the proposal. According to UNICE, the tax would have be economically harmful, by increasing production costs and reducing productivity; would not be environmentally effective since by taxing nuclear energy it would not directly promote reduction of greenhouse gas emissions, and the loss of international competitiveness would be detrimental to the environment; and would not achieve tax harmonisation since it allows countries to exceed minimum rates.