Commission to revive EU carbon tax debate

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European commissioners will start talks on introducing minimum tax rates for carbon on Wednesday (23 June). But it is still unclear when and if Tax Commissioner Algirdas Šemeta's suggestions will develop into a formal proposal.

EU Tax Commissioner Algirdas Šemeta has prioritised revising the Energy Taxation Directive, which would include an EU-wide minimum tax on the CO2 content of fuels. The idea is to bring taxation more in line with Europe's environmental obligations.

During their Wednesday meeting, the commissioners will hold an "orientation debate" on an internal working document. Šemeta hopes to test the water to see whether he can proceed with a formal proposal, which is still being drafted.

The issue of taxation is sensitive, and the chances are that the proposal, if tabled, would result in years of in-fighting. The potential tabling of such proposals has been mooted since 2008, but Šemeta's predecessor decided against the idea amid disagreement within the college of commissioners.

Member states, like the Nordic countries, support the proposal because they have been applying similar national carbon taxes since the 1990s. Others, such as the UK and Ireland, however, are against Brussels setting taxes.

A potential proposal would have to get the unanimous backing of every member state to become law as taxation requires unanimity. But the UK for one is determined to veto such legislation, as it would require a redesign of national energy legislation.

"The UK does not support the idea of a mandatory pan-EU carbon tax and hopes the Commission will not bring forward such a proposal," said a UK government spokesperson.

"We think instead that the focus of any legislative proposal should be on reviewing current minimum rates of taxation, especially in the road transport sector, where 'tank tourism' creates both single market and environmental problems, and undermines national tax bases," she added.

The Commission departments also appear divided, with some questioning whether now is the right time to introduce a measure that could potentially harm the competitiveness of European farmers and car manufacturers.

Plans to exempt energy products that fall under the EU's emissions trading scheme (EU ETS) have also been criticised, as many carbon-trading industries get free allowances and would get away with neither paying for allowances nor paying tax.

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