Climate taxes to sort out public finances: The debate in the European Union

Practically all Member States in the European Union are grappling with massive budgetary black holes caused by economic stimulus programmes, bailout packages and crisis-driven revenue shortfalls. At the same time progressive climate change calls for urgent action. It is hoped that climate taxes will address both problems by achieving a financing as well as a steering effect. However, climate taxes in Europe are organised so differently that, for all the European Commission’s efforts, their harmonisation will presumably be very difficult to realise – even though standardisation would send out a consistent price signal for greenhouse gas emissions in Europe. The fiscal impact in the individual EU countries is also likely to vary considerably.