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Taxing CO2 Would Help EU Debt Crisis, Former Ministers Say

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The City of Light--and Smog
View of the Eiffel Tower and the city of Paris, France during dusk. Photographer: Marcaux

May 16 (Bloomberg) -- Taxing carbon emissions and the consumption of fossil fuels would help Europe overcome its sovereign-debt crisis and help protect the climate, said four former ministers including Hans Eichel, Germany’s minister of finance from 1999 to 2005.

“As European finance ministers meet today in Brussels, they should be thinking more imaginatively about their fiscal options than they have done in the past,” the former ministers said in a letter dated yesterday and addressed to current ministers. “Carbon and energy taxes can produce better economic results than conventional taxes, as well as helping to cut emissions.”

Changing taxes on fossil fuels could raise more than 16 billion euros ($20 billion) a year in Spain, Poland and Hungary alone by 2020, according to a report published today by Vivid Economics prepared for Green Budget Europe, an environmental lobby group in Berlin. Revenue from carbon and energy taxes could cut Spain’s budget deficit by 15 percent a year by the end of the decade, according to the report.

Poland on March 9 vetoed tighter greenhouse-gas targets for Europe. EU carbon permits fell to a record 5.99 euros a metric ton on April 4, on speculation the market is oversupplied. According to a forecast by Bloomberg New Energy Finance, the market will have a 10 percent surplus in the five years through 2012.

Stimulating Growth

“National debt is a millstone round the neck of every European economy and governments need to raise revenue to pay off debt and reduce deficits,” Eichel said today in an e-mailed statement. “Until now, the political answer has been austerity, but thankfully the debate is now moving towards measures that will stimulate growth, rather than just reduce spending.”

The letter to finance ministers was co-signed by Yannis Palaiokrassas, former Greek minister of finance, Dr. Josef Riegler, former Vice-Chancellor of Austria, Dr. Martin Bursik, former deputy Prime Minister of the Czech Republic, and Franz Fischler, former European Union commissioner for agriculture and fisheries.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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