Parliament shoots down Commission’s energy tax plan

Germany's 'diesel summit' doesn't undo the damage of dirty diesel cars.

Conservatives in the European Parliament delivered a setback for European Commission plans to erase tax benefits for diesel fuel, saying that a period of austerity and high fuel costs is not the time for such moves.

MEPS voted 374-217, with 73 abstentions, for an overhaul of the EU executive’s year-old draft energy taxation directive that would require members states to end their practice of taxing diesel fuel at lower rates than gasoline.

The vote also calls for changes to the Commission's proposed minimum carbon tax on emissions from households, farms and the transport industry not already covered under the EU’s Emissions Trading System, the EU's main tool to reduce carbon dioxide pollution.

The Parliament’s recommendations are non-binding. But they lay the groundwork for anticipated changes in the Council of Ministers, where Poland has already blocked moves to impose stronger emission-reductions obligations, and at a time when high fuel prices may tame the political appetite for higher taxes.

The MEP’s decision was seen as a win for consumers and the centre-right that led the fight.

The vote “is a great political victory for the EPP Group, which remained firm on its position. But it is first and foremost a victory for our citizens," said Luxembourg MEP Astrid Lulling, a member of the European People’s Party and author of the report adopted by Parliament.

Lulling’s report – which recommends 50 amendments – says the draft taxation directive would “have direct negative social impact” from higher prices for coal, natural gas, heating oil and diesel oil.

That is an assertion that was strongly rejected by Algirdas Šemeta, the EU Taxation Commissioner: "The Commission’s proposal does not seek to penalise diesel, but to tax fuels in a neutral way. All fuels would compete on the basis of their merits instead of tax advantages," he said after the vote.

Consumers already pinched

London MEP Marina Yannakoudakis (European Conservatives and Reformist Group) said the vote was a victory for consumers.

“In the middle of an economic crisis, families are feeling the pinch,” she said. “Does the EU really want to tax its citizens further just for driving their kids to school or for turning on the heating?”

Socialist and Democrats (S&D) leaders also expressed reservations about higher costs for diesel.

"We need to make sure that we have higher taxation for those emissions that are detrimental to the environment,” Hannes Swoboda, the S&D president, said in a statement.

“However, while we will follow this approach it must not lead to an increase of price for diesel. Diesel cars are less polluting and are important for reducing CO2 from our transport system,” the Austrian MEP said.

Environmentalists, however, said such arguments were hollow. Although diesel engines emit fewer greenhouse gases compared to their gasoline counterparts, they release higher levels of smog-causing nitrogen oxide and fine particulate matter that aggravate respiratory problems.

“A majority of MEPs has today voted to include perverse incentives for dirty fuels under the EU's energy taxation system,” Belgian Green MEP Philippe Lamberts said yesterday.

Parliament’s recommendations also say that aid should be made available to low-income households and charities as energy tax exemptions are phased out, as proposed by the Commission. It also says industries already subject to the EU’s Emissions Trading System should be exempt from a carbon tax.

Algirdas Šemeta, commissioner for taxation and customs who is responsible for the taxation proposals, said:

"The impact on diesel prices has been overstated. Already today a majority of member states tax diesel at rates higher than the minima set out in our proposal. National governments will maintain flexibility in how they structure their energy taxes, and options exist to prevent a rise in diesel prices if this is what they want to achieve."

Šemeta, in a statement, called the draft directive “is a green growth initiative. It is fully in line with our climate change commitments and the goal of a more resource efficient, sustainable economy in Europe. Moreover, it supports a growth-friendly tax shift in the member states and could create a million jobs across Europe by 2030."

Belgian MEP Philippe Lamberts (Greens) also said the tax scheme would not hurt consumers.

"Neutral taxation would not lead to a spike in diesel prices as claimed by the dirty fuel lobby. For starters, the proposals will not be fully in place until 2023, giving ample time for adjustment. Furthermore, the proposals provide for neutral taxation - governments can achieve this by reducing the rates applicable to petrol, rather than by increasing the rates on diesel, if they so choose. EU governments must now stand firm and support neutral taxation of fuel types.”

 

The Brussels office of the Fédération Internationale de l'Automobile (FIA), which represents 36 million motorists via its 106 member clubs, said before the vote it welcomed efforts to end distortions in the energy sector.

But in reference to Commission efforts to erase tax differences between diesel and gasoline, FIA Region I President Werner Kraus said: “At a time of high fuel prices, it is unfair to now penalise consumers who have been encouraged to make a long-term investment in diesel cars on the basis of lower running costs and better fuel efficiency.

“In certain countries, diesel cars already account for as high as 75% of new car purchases. Raising diesel’s cost now would send the wrong message on both the environment and price”, Kraus said.

The European Commission proposed a revision of the Energy Taxation Directive in April last year, saying the legislation had to be updated to address energy and climate concerns.

The directive's current scope, it said, is incoherent with the EU Emission Trading System (ETS) and the need to reduce CO2 emissions, as current taxation systems give unfair competitive advantage to polluting fuels over renewables such as biofuels for example.

According to the Commission, these issues would be addressed by shifting taxation to energy content, rather than volume.

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