Split over tax plan casts doubt on Kyoto targets

Date: 18/12/1997

By Simon Coss

EU governments are shying away from one of the few policy options capable of delivering the greenhouse gas cuts agreed at last week's climate change conference in Kyoto, warn environmental experts.

The European Commission has been given six months to prepare proposals on how the Union should achieve the reductions it signed up to in Kyoto. But, at present, environmental officials believe that one of the only certain ways of ensuring significant reductions is an increase in taxes on energy products.

However, the current deadlock over proposals already on the table to harmonise and extend a range of energy levies across the EU demonstrates just how difficult it is to get member states to agree to such measures.

At the Kyoto conference, the Union agreed to reduce, by 2012 at the latest, emissions of six greenhouse gases to 8% below 1990 levels.

The Commission claims that if member states followed the plan drawn up by Taxation Commissioner Mario Monti in March, they would be able to reduce carbon dioxide (CO2) emissions by roughly 2% over the next 12 years at a maximum cost of around 0.2% of the Union's annual Gross Domestic Product.

"Two per cent might seem a small amount, but it is not that small. It represents a quarter of the target," said one official.

The institution is at pains to stress that it has no particular desire to suggest increases in taxes, but argues that there are no other tried and tested alternatives which can be guaranteed to deliver the level of emission cuts needed. "How else are we going to do it? If there were another way, we would drop our proposals. But nothing else is in a similar state of development," said one Commission environmental expert.

After a meeting of EU environment ministers this week, Luxembourg's Johny Lahure said member states were still keen on Monti's idea. However, given the depth of divisions over the details, it is hard to see the current talks resulting in a directive with any real teeth.

"The UK has said it is willing to negotiate on the proposal, but is not prepared to accept any solution which would oblige London to introduce new taxes on energy and fuels. Ireland has said it will not sanction any tax rises for industry or private individuals. Germany is opposed to any moves which would mean higher energy bills for industry. Spain is calling for a voluntary approach and the Scandinavians say the derogations everyone else is asking for are unacceptable," explained one national official.

Portugal and Greece are also known to be unhappy with Monti's plans.

Officials say one alternative option which could be considered is 'emissions trading' - buying the 'right to pollute' from countries which fall short of their emission quotas.

However, the Commission stresses that this would be a considerable step into the unknown as the practice has never been tried before. It would also be politically embarrassing as Environment Commissioner Ritt Bjerregaard was scathingly critical of the US when it first raised the idea.

Industry argues that the only real way forward is for business and governments to draw up voluntary negotiated agreements.

"This is the only way it will work. Industry needs the flexibility to find the best solution for each site. If you impose blunt instruments from outside, you will never get efficient measures," explained Francesco Balocco, an energy expert for chemicals giant Dow Europe. "If you put on a tax, as in the Monti plan, that will simply reduce the finances which are available for spending on energy efficiency."

Balocco also pointed out that industry had a vested interest in using as little energy as possible. "The reason is very simple. Energy is very expensive, especially in Europe," he said.