Europe’s unlikely energy saviour – the taxman

Energy Commissioner Andris Piebalgs does not hesitate to identify the biggest challenge posed by his energy efficiency action plan, put forward last week (19 October): using tax policy for energy efficiency.

"We have some elements but we need to be more ambitious. Tax policy is the most effective tool to improve energy efficiency," the commissioner says.

This will mean persuading 25 governments to approve the idea of revising national tax policies, many of which have been in place for over a century.

"Tax policies take a long time evolving. I don’t underestimate the challenge, especially for old timer EU countries.

"It is easier for example in the Baltics, where current tax policies have only existed since the 1990s," says the Latvian commissioner.

But ideas such as tax credits are essential, he believes, both to encourage manufacturers to make the most efficient appliances and equipment and to make sure shoppers buy them.

"With energy taxation we have already done quite a lot with particular taxes on things," he says. "Why did we never think about incentives? Why did we just rely on the market to supply us?"

"We need a system where the markets adapt. And what makes markets adapt? Taxation."

But he admits that "member states could reject this because they think the Commission is once again trying to take something they want to preserve for themselves".

The Commission will have to calm these fears at the same time as directing talks on sharing more of another policy area jealously guarded by member states: energy itself.

"It is a pity these two areas [energy and taxation] are attached, but I don’t see how they can be apart," says Piebalgs.

The energy commissioner also says the scope of his energy efficiency action plan raises questions about how Commission departments work together.

"Energy efficiency is definitely a shared priority for the College [of commissioners] but when I look at the resources at my disposal they are not sufficient."

Piebalgs is happy that topics such as energy sources and compliance with EU energy directives are clearly his responsibility. But a lot of other issues, including energy education programmes and the taxation he supports, need to be properly dealt with in other Commission directorates general.

"External relations also need to be involved as much as possible. Energy efficient technologies are one of the best things we can export to other countries," he says.

"We should address the better use of resources on this. Otherwise we could create grey zones, where everyone assumes everyone else is doing something."

Regardless of the workload, Piebalgs is delighted to see a subject close to his heart getting more and more political attention. But he is not taking it for granted that energy efficiency will always be centre stage.

He suspects EU enthusiasm for energy efficiency is not held up by purely altruistic thoughts of fighting climate change by cutting CO2 emissions.

Recent signs that the Organization of the Petroleum Exporting Countries (OPEC) will not let the price of crude fall any lower than $60 could make energy efficiency look like the cheap option, says the commissioner.

"It almost looks as though OPEC is supporting us - usually prices are up and down but now we have a clear floor."

Even without almost guaranteed high oil prices, Piebalgs hopes governments will see the importance of his energy efficiency proposals.

"The stakes are high," he says, not only because of climate change. "Europe is also crying out for growth and jobs", he says, and a world-beating energy efficiency sector could provide both.

"Energy efficiency is also not too bad for security of supply," the commissioner explains. "It’s very nice that we go to meet [Russian President Vladimir] Putin to talk about securing imported supplies, but we need efficiency at home too."

Piebalgs admits he did not guess his job would become so high profile when he was chosen as energy commissioner two years ago.

"But after taking the job I read a bit of history and saw that every ten or 15 years there is an energy crisis. It is surprising how quickly we forget."

He points to previous periods of panic over energy imports from Iraq and Saudi Arabia "and now Russia". "It is the same pattern, we have already seen it. But then oil prices go down and we forget."

Considering the challenges ahead, the commissioner jokes: "If I had been cleverer, I might have asked the president to find me another job."

Energy Commissioner Andris Piebalgs does not hesitate to identify the biggest challenge posed by his energy efficiency action plan, put forward last week (19 October): using tax policy for energy efficiency.