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The British government is "highly likely" to block European Commission proposals for a carbon tax contained in a widely-circulated draft version of the Energy Taxation Directive, EU diplomatic sources said yesterday (12 April).

"Without saying that we will definitely kill this thing before it is born, I think it is highly likely that we will block it," a diplomat from one member state told EurActiv.

The draft directive, seen by EurActiv and expected to be presented today, proposes separate carbon dioxide and consumption taxes on fuel to advance the EU's climate goals for 2020.

It would oblige member states to set minimum rates of CO2 taxes at €20 per tonne for fuel used for purposes of transport and heating, from 2013.

The tax would be automatically linked to inflation – measured every third year - and it would compel member states to institute 'fuel-neutral' taxation from 2020, ensuring higher taxes for energy-intensive fuel such as coal and diesel.

A litre of diesel would be taxed at 8% more than a litre of petrol under the proposals, to deter the use of gas-guzzling SUVs and pick-up trucks.

Last push to postpone entry into force

This would also entail changes to national legislation across the European Union. EurActiv understands that as late as yesterday night (12 April), several commissioners were pushing for the proposal to be postponed until 2023.

Less contentiously, electricity companies and other firms that are currently trading carbon in the Emissions Trading Scheme would not be affected by the directive.

"Our objective is less about introducing a new tax than about restructuring energy taxation so as to meet the EU's high priority goals of climate change, energy efficiency and fair competition," said Algirdas Šemeta, the bloc's commissioner for taxation.

As such, environmental groups have broadly welcomed the initiative. But under the voting rules that apply to taxation proposals, opposition from any one EU state could kill it.

"It is a unanimity dossier and we're not going to support new measures in this area," the EU diplomat said.

"Taking into account the opposition of other states as well, it is certainly one we would oppose and that therefore points you towards what we might do in the Council."

The motor lobby in Britain has responded angrily to news of the proposed tax, with the Automobile Association describing it as "madness" at a time of rising prices.

But a new report released today by the environmental think-tank Transport and Environment claims that fuel prices have declined by 10 cents per litre in real terms since 1999.

If the taxes had been inflation-corrected and revenues had been used to cut labour taxes instead, the report says that 350,000 jobs could have been saved, oil imports would have been cut by €11 billion and road transport CO2 emissions would have been 6% lower.

The current Energy Taxation Directive was adopted by the European Commission in October 2003 with a string of exemptions and phase-in periods.

It defines minimum taxation levels for all traded energy products – such as petrol, diesel and kerosene used for transport, heating and electricity.

But it excludes international aviation and shipping.

Even so, many of its measures have been embraced by environmentalists. Dutch Green MEP Bas Eickhout told EurActiv that the directive was a logical and "very crucial" initiative.

"My message to countries thinking about using a veto," he said, "is that if you are going to block even this modest proposal – after all your talk about the 'polluter pays' principle being a key driver for EU legislation – then its clear that your principles were never anything more than rhetoric".

"This is the moment of truth," he added.
 

Source: EurActiv