EU to revive debate on minimum energy tax levels


EU officials are to debate a new set of tax proposals to promote clean fuel and erode fiscal advantages that have made diesel relatively cheap, a document seen by Reuters showed.

The Commission has long been seeking to change energy taxation, but some member states have repeatedly thwarted progress and are likely to continue to do so.

Taxation law in the European Union requires the unanimity of all 27 member states, which is almost impossible to achieve.

Luxembourg, for instance, has been generating revenue through particularly low taxes on diesel, meaning vehicles, notably lorries carrying freight, stop in the centrally located nation to refuel.

Ahead of a working party meeting on 23 January that will bring together representatives of member states, an internal European presidency note dated 9 January on minimum rates for energy products revives the idea of taxing fuels according to carbon dioxide emissions and energy content.

For now, fuel is taxed based on volume.

While trying to lower carbon emissions, the European Commission has said it is "fuel neutral" when it comes to setting minimum taxation levels.

Because a litre of diesel contains more energy and more carbon than a litre of gasoline, the changes under discussion, if agreed, could mean minimum tax rates per liter of diesel would eventually be higher than for gasoline.

Currently diesel is cheaper than petrol in nearly all EU states, with Britain a notable exception.

While offering some exemptions, the new proposals would over time provide incentives for sustainable biofuels, as well as natural gas and liquefied petroleum gas (LPG).

Diesel worries

Diesel use is a major concern for the Commission because the EU's refineries cannot produce enough of it and the bloc often has to import diesel, while exporting surplus gasoline, sometimes at a loss.

Diesel fumes have also been named as a cancer risk by the World Health Organization.

Last week, Environment Commissioner Janez Poto?nik said it was crucial to reduce diesel emissions as part of efforts to improve air quality.

He is pressing to improve the accuracy of vehicle testing because, especially for diesel vehicles, there are major discrepancies between emissions recorded in the laboratory and "real-world" emissions generated in day-to-day use.

Algirdas Šemeta, the European commissioner in charge of taxation policy, has sought to fend off potential opposition to any tax changes from diesel-engine giants, such as Volkswagen, saying a slow phase-in would give plenty of time to adapt engine requirements.

Environmental groups agree diesel needs to be taxed more.

A group of non-governmental organisations in December wrote to EU finance ministers in a letter seen by Reuters calling on them "to support a significant increase in the minimum levels of taxation of diesel fuel for transport purposes".

Luxembourg's diesel rates are good for generating revenue for it, but so-called "tank tourism" was negative for the nation's neighbours, said the letter, signed by more than 30 campaign groups.

Passenger cars alone are responsible for around 12% of total EU emissions of carbon dioxide (CO2), the main greenhouse gas.

In 2007, the EU proposed legislation setting emission performance standards for new cars, which was adopted in 2009 by the European Parliament and the EU Council of Ministers. Today's EU targets ensure that average emissions from new passenger cars do not exceed 130 grams of CO2 per km (g/km) by 2015.

A White Paper on Transport, presented by the Commission in February 2011, flagged measures to raise the €1.8 trillion which the EU says is needed for infrastructure investment in the next 20 years.

Proposals published earlier this year have set a further targets of 95 grams for new passenger cars by 2020, and 147 g/km for vans. By the end of 2014, new targets could be announced for 2025 and 2030.

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