EU eyes tax breaks to ‘green’ economic recovery

Fiscal incentives backed by EU funds to promote cleaner vehicles and building efficiency are recommended as part of a 200-billion-euro economic recovery plan unveiled by the European Commission yesterday (26 November). 

The plan proposes three public-private partnerships (PPPs), the most ambitious of which is designed to achieve a ‘breakthrough’ in reducing CO2 emissions from the European car fleet. Europe’s automobile industry has been hit particularly hard by the economic crisis, according to industry and government figures (see EURACTIV 27/11/08).

The buildings and construction sector fall under the second PPP proposed in the plan, though the initiative is less ambitious in scope and limited to €1 billion. EU structural and cohesion funds normally reserved for 2010 will be brought forward and already made available in 2009, however, according to the text.

The EIB will also boost annual investments for energy and climate change-related infrastructure by up to €6 billion, and a new ‘2020 fund for energy, climate change and infrastructure’ is also envisaged by the plan, though details are not included.

A cross-sector PPP valued at €1.2 billion for the manufacturing industry, notably the ICT sector, is the last point outlined in the proposals.

“Targeted tax incentives” should complement nearly all the actions outlined, according to the Commission, which will propose reduced value added tax (VAT) for ‘green’ goods and services, especially those that contribute to greater energy efficiency in buildings. In addition, “member states should consider introducing a reduction of property tax for energy-performing buildings,” the communication says.

The recovery plan will be scrutinised and potentially adopted by EU governments during the 11-12 December European summit in Brussels. 

Common agreement on tax breaks between EU governments have been notoriously difficult to broker, while at present, Germany remains opposed to a compromise deal on reduced VAT rates. No deal was reached on the issue during the last meeting of EU finance ministers. 

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