Ministers to reject carbon car-tax proposal

EU ministers are set to reject plans put forward by the European Commission to replace car registration tax with a tax based on carbon dioxide (CO2) emissions.

The Commission proposal, published in June 2005, has been blocked by governments wary of changes to their revenues and tax systems. During the 28 months since publication, the proposed directive has only been discussed once by ministers, as an informal topic over lunch at an Economic and Financial Affairs (Ecofin) Council in May.

The proposal will be formally discussed for the first time at Ecofin on Tuesday (13 November), with a final attempt to reach political agreement scheduled for 4 December.

The Portuguese presidency of the EU says that discussions between member states officials, at the level of Council working groups, suggest that the core elements of the proposal will be rejected. "A broad convergence of views seemed to be emerging in [that]…there should be no provision for the abolition of registration taxes," says a document prepared by the EU presidency for Ecofin.

The paper adds that there is "opposition from a considerable number of member states against an obligation to introduce a CO2 element into national car taxes".

Instead, "a large majority" of national representatives at the working group would support a "flexible approach" to increase the use of CO2-linked vehicle taxes.

This would oblige all member states to introduce some kind of CO2 tax, but the type could be based on "one or more CO2-related elements (grams of CO2 emitted, fuel consumption, or other elements)".

Member states would be free to decide on the changes necessary in their own tax systems to make sure the carbon tax had an effect, either through adjustments to the tax base, tax rates or amount of tax.

Eleven member states, including France, Italy, the UK and Portugal, already link their car and/or vehicle fuel taxes to CO2 emissions and are expected to support the proposal. Making the principle compulsory across all member states would help the EU meet its targets to reduce CO2 emissions under the Kyoto Protocol on climate change, according to Portugal.

But a German diplomat said that Germany hoped member states would throw out any proposal that did not include an end to registration tax and a standard EU carbon tax. "If the package is completely devoid of substance, you have to ask, why would we be doing this?" asked the diplomat.

Member states would face pressure from the car industry to reject a flexible proposal.

Sigrid de Vries from ACEA, the European carmakers’ association, said: "We support a CO2-based tax…but this proposal would not remove the enormous diversity in the existing schemes, which is a distorting factor and fails to give a clear market signal."

T&E, a conservation group, said that the watered down proposal would be better than nothing.

EU ministers are set to reject plans put forward by the European Commission to replace car registration tax with a tax based on carbon dioxide (CO2) emissions.