Breakthrough in EU debate on energy taxation

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Published 09 May 2002, updated 29 January 2010

At the ECOFIN meeting on 7 May, the EU Finance Ministers came one step closer to finding an agreement on energy taxation. The ministers welcomed the Spanish proposal and decided to set up a high-level working group to develop the proposal further.

During the Meeting of the Finance Ministers on 6-7 May, energy taxation was discussed. The Spanish minister Rodrigo Rato had introduced a proposal for the setting of minimum levels of energy taxation. The proposal suggests tax rates for all energy products used for heating or fuel, except biofuel where special rules should apply. It also suggests many exemptions to the regulations for many energy intensive industries.

The ministers decided to set up a high-level group to advance the debate and thereafter report back to the ECOFIN, preferably before the end of the Spanish presidency.

Positions:

The European Environment Bureauhas started a campaign for a fiscal reform in the EU. It states that it is "encouraging to see the recent evolution of the Spanish, from systematic opposition to taking a constructive attitude under their newly started Presidency. If unanimity cannot be reached, then other ways, including enhanced cooperation, or informal multilateral cooperation, should be contemplated in order to get environmental taxation reform progress".

Background:

Harmonisation of energy taxes in the EU has been on the agenda for the many years. The Commission issued a proposal on minimum taxation levels on energy already in 1997. However, tax policy requires unanimity in the Council, which never has been possible to obtain. The Barcelona summit in March concluded that a proposal for energy tax should be adopted by the end of this year.

In the meantime, many countries have introduced national energy taxes. Most national schemes exempt large-scale energy users, and some systems (as the Dutch) have reduced rates over a certain threshold. In some cases (e.g. Sweden), the revenue from the tax is returned to the industry by reducing other taxes, mainly labour taxes.