"We now have a system with a cap on 40% of emissions," Carlgren said in a Swedish radio broadcast last week (8 May), referring to the EU cap-and-trade system for carbon dioxide emissions.
"But the remaining 60% also need to come down and a climate tax such as a CO2 tax is absolutely one of the best ways to achieve this," he added, reviving an old debate about which economic instruments are best suited to reduce emissions of greenhouse gases.
Anette Persson, energy counsellor at the Swedish Permanent Representation to the EU, confirmed that Sweden is hoping to rally support for its proposal by highlighting how well a carbon tax has worked at national level. She conceded nevertheless that taxation is "extremely difficult as a community competence," adding that harmonising taxes would be the easiest option.
Carlgren said he was unhappy with the way the Commission had been delaying debate on the issue, taking the economic crisis as a pretext. He added that the tax would in any case only be implemented in 2013, long after Europe has emerged from the recession.
Suggestions of a tax on CO2 emissions have proven unpopular among many voters, and few governments have so far dared to use such an instrument.
Together with Norwary, Sweden was one of the first countries to introduce a tax on carbon emissions back in 1991. Customers already pay 2.34 kronor per litre for their fuel, and the government's proposed climate bill would hike up the price of diesel further, and link vehicle registration fees to carbon emissions.
Taxes are considered by economists to be the fairest way of reducing greenhouse gases, as they apply across the entire economy. By contrast, the EU's cap-and-trade scheme is selective and covers only the most polluting industries, such as power generation, cement and others.
Doomed to fail
Apart from Sweden, other EU countries levying taxes on carbon emissions from fuel, light industry and agriculture include Finland, Denmark and Slovenia.
These would be the obvious candidates to support Sweden on the tax. But the issue could be more complicated in countries like Denmark, which has a big Eurosceptic constituency, said Christian Egenhofer, head of the energy and climate programme at the Centre for European Policy Studies (CEPS).
Egenhofer said the problem had always been that EU states did not want to accept any EU-wide CO2 taxes for fear of signalling that they would allow the EU to interfere with their fiscal autonomy. He said they were unlikely to budge from this position, although the financial crisis could potentially trigger a rethink.
"In the past there has been no chance of having a coordinated approach to any EU taxes. That is probably still the general line of thinking, but because of huge budget deficits and accumulated government debts, governments might bite the bullet and look into areas to fill the gap," Egenhofer said.
Nevertheless, he argued that many Central and Eastern European member states would be likely to resist the plans as they have lighter taxation. Moreover, an additional tax on limited disposable income might not be politically acceptable, he noted.
The case for a carbon tax has been made on the basis that it can be easily increased if the initial level does not achieve the desired emissions cuts. Furthermore, it is more predictable than carbon markets, as shown by the significant fluctuation of carbon prices in the EU ETS (EurActiv 03/03/09).
Egenhofer nevertheless argued that as non-carbon trading sectors are numerous, it would make sense to place a carbon tax on some of them, but not across the board. "If it's across the board, it's probably just a revenue raise," he said, adding that many studies had identified the areas where price signals work.
"I could imagine that the new member states would ask in return to have additional money to deal with the hardship of population in these countries, which might make the EU 15 member states a little bit less interested in the whole matter," Egenhofer said.
If such a situation did arise, it could be comparable to the concessions that were granted to Poland and other new member states in the EU ETS (EurActiv 21/11/08). Their power sectors will continue to receive a substantial number of their emissions allowances for free during the post-2013 period, when the respective installations in the EU 15 will have to buy all their permits at auction.
Efficiency standards instead?
Stephan Singer, director of global energy policy at WWF, argued that putting carbon taxes on the agenda at last minute was a "little bit of posturing" on Sweden's part. "As useful as they may be on a common agenda for the EU, they are probably a waste of time," he stated.
"I wonder whether the time is not better used by the Swedish and other EU presidencies to look into energy efficiency standards, in this case for cars?," said Singer.
