EU Nations Aim to Scale Back Energy-Tax Increase, Document Shows

European Union governments want to scale back a planned increase in fuel taxes as the bloc seeks to emerge from a recession, according to a report prepared for EU ministers.

EU nations are seeking lower proposed minimum-tax levels and a new carbon-emissions levy in a draft law that would change the way the bloc taxes energy, according to the planning document, obtained by Bloomberg News. Ireland, which holds the EU rotating presidency, prepared the report, dated June 5, ahead of EU meetings later this month.

The draft energy-taxation law was proposed by the European Commission, the 27-nation EU’s regulatory arm, in 2011 to spur energy savings and the development of low-emission technologies as part of the fight against climate change. The legislation, which would tax all fuels in the same way, needs the unanimous backing of EU national governments.

Current European law sets minimum tax rates for mineral oils, coal, natural gas and electricity to prevent distortions of competition between EU countries rather than to promote environmental goals. Separate EU emissions-trading legislation imposes carbon caps on power plants and factories. Under the commission proposal, the energy component and the CO2 element would be combined to produce the overall minimum level at which a fuel is taxed.

Governments are considering cutting the levy based on emissions to 12 euros ($15.90) a metric ton, or eight euros less than proposed by the commission, reflecting the decline in the price of allowances in the EU emissions-trading system. The level would gradually rise to 20 euros by 2024 and the energy component of the tax would be adjusted accordingly, according to a proposal by Ireland.


The presidency also suggested a further adjustment of the carbon-related component to 9 euros for heating fuels for business use, according to the document. In the case of motor fuels, the presidency seeks a link to inflation, the report showed.

“More development on minimum rates is required to address remaining concerns of member states such as the rates for LPG, natural gas, coal and kerosene as heating fuels for business use,” Ireland said in the document.

The member states’ campaign highlights the difficulty the EU is facing to spur green technologies while protecting the competitiveness of its industry. The European Parliament in April rejected a stopgap measure to help carbon prices rebound from record lows amid lawmakers’ concerns that they would raise energy prices. EU emission allowances for delivery in December dropped as much as 87 percent in the past two years to an all-time low of 2.46 euros after the Parliament’s vote.

Under the overhauled energy taxation system, businesses outside the emissions-trading system as well as households would pay both the energy component and the emissions element of the taxes, under the commission’s proposal. Industries in the cap-and-trade system would be spared the emissions element.

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