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29/08/2016

A new case for EU energy taxation?

Climate & Environment

A new case for EU energy taxation?

The European Commission published a new study on the relationship between environmental taxation and employment creation.

Background

The European Commission recently published a new study on the relationship between environmental taxation and employment creation. The independent study by the University of Bath indicates that taxes on energy and environment could lead to a 'double dividend'. Not only would these taxes produce improvements in the environment; they would also generate government revenue, which could be used to reduce labor market distortionary taxes (income tax, social security taxes and others). In that way, they would lead to an increase in employment.

During the 90s, the Commission launched several proposals to introduce a common ecotax system, but the need to get unanimity in the Council always hindered the introduction of this new form of taxation at EU level. On the other hand, a recent report by the European Environment Agency has shown that individual member states are making increasing use of environmental taxes and that the idea of energy tax harmonisation in a few countries only ('Eco-Schengen') is gaining ground.