European ecological tax reform "gathering pace"

Review of recent experience highlights growing north-south divide between EU members

EU governments have increasingly begun to switch taxation away from labour and onto pollution-generating products and activities over the last three years, according to a new report for the European Commission.

"The most notable development in terms of environmental taxes is the increasing implementation of ecological tax reforms in EU member states," according to Forum for the Future, a British NGO. "At least nine member states have implemented such a revenue neutral tax or will do so in the near future," they say.

Germany, the UK, France and Sweden are prominent examples, the report says, while a parallel trend has been the development of complex accompanying policy packages, such as the establishment of rebates to mitigate effects on industrial competitiveness.

A second important development, the report says, is a divergence between northern EU member states, where energy taxation has generally increased and where most new ecotaxes have been introduced, and the south of the bloc - particularly Greece and Portugal - where some energy taxes have plummeted. Energy taxes provide over three-quarters of total environmental tax revenues over the whole EU, it found.

This report also shows how member states would be affected by a proposed EU minimum rate of excise duty on energy products - the "Monti proposal". For instance, to reach the minimum rate proposed for diesel, 13 member states would have to raise their current tax levels. Seven would have to do the same for petrol taxes. No comparison showing the relevant figures for 1997, the year the proposal was made, are given.

However, a Commission official told ENDS Daily today that the same did not apply to industrial fuels and that several member states had recently informally expressed a strong desire to push ahead with the EU tax proposal.

A high-level meeting to be convened by France in October would aim at finding a way forward with the proposal, he said. Adoption of the directive is currently being blocked by Spain. Earlier this month the Commission published a study which found that the proposal would generate employment as well as reduce pollution (ENDS Daily 14 August).

Follow Up:
European Commission, tel: +32 2 299 1111, and report with database update. See also the OECD environmental taxes database.

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