Spain vetoes progress on EU energy tax talks

Future of energy tax plan in doubt as Spanish minister rejects compromise proposal

Spain has blocked efforts by the Germany presidency of the EU to push ahead with plans to extend EU-wide minimum levels of energy tax - raising doubts over the future of the proposal.

At a meeting of finance ministers in Brussels yesterday, Germany presented a range of concessions that were aimed specifically at allaying the fears of the southern EU members that the measure would be inflationary and damage industry (ENDS Daily 18 May). But Spain's state secretary for economic affairs Cristóbal Montoro told his colleagues that the very principle of expanding EU-wide energy tax levels was unacceptable.

As the unanimous approval of national governments is required to adopt changes to EU fiscal policy, Spain has effectively vetoed any immediate progress on the proposal, which would impose EU-wide minimum tax rates on gas, coal, lignite and electricity for the first time (ENDS Daily 13 March 1997). All other governments with the exception of Ireland, which also remains unconvinced, said the German paper was an acceptable basis on which to continue negotiations.

The question now remains whether the proposal will be dropped completely. Finland, which has its own carbon tax, is known to support the proposal and wanted to guide it through to adoption during its six-month stint of EU leadership which begins in July. According to a Commission official, Finnish officials will meet with their German counterparts in the coming days to see if anything can be salvaged following yesterday's meeting so that talks can continue under Helsinki's leadership.

If Finland does decide to persevere with the proposal - which is a key part of the Commission's strategy to combat greenhouse gas emissions - it will be faced by two difficulties. Firstly it will have to find a way of softening Spain's opposition without alienating those countries which feel too many concessions have already been offered. A Commission official told ENDS Daily: "Sweden, Belgium and the Netherlands are now saying there's not much left [of the proposal]. They are saying that they cannot go any further - but they are still on board at the moment."

Secondly Finland will have very little time to make progress, with only four months available for negotiations after the EU's August break. After then it is Portugal - not one of the greatest supporters of the tax measures - which assumes the presidency.

The Commission official said it was possible that Portugal might push the dossier through during the first half of 2000 if most of the negotiations had already been completed and as long as its own misgivings - particularly over taxing electricity from hydro generation - were addressed.

Follow Up:
EU Council of Ministers, tel: +32 2 285 6111.

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