Debate rages over impact of energy taxes on business

Date: 10/02/2000

By Tim Jones

BIG industry has taken a long time to come around to the idea that it should address the problem of global warming at all. So persuading the world's most ravenous energy consumers that they should also pay a tax every time they use fuel as a raw material is, for many, a step too far.

Yet that has been the constant refrain from the European Commission and some EU governments ever since they were told how much they would have to do individually to meet the Union's Kyoto targets.

The squeals have come from unlikely sources, with some of those who might have been expected to oppose such measures leading the way in implementing them, while others are steadfastly refusing to budge.

The British government, which had long opposed the introduction of such a tax, has announced plans for a 2.8-billion-euro-a-year 'climate-change levy' to help reach its own goal of a 12.5% cut. The Union-wide energy-tax plan, first proposed in 1992 to meet the Rio targets, may be forever stuck in the negotiating chamber because of implacable Spanish opposition, but industry still has a lot to worry about as the British are far from alone.

The German government introduced a wide-ranging energy tax a year ago, albeit with 27 exemptions for energy-intensive industries, and French Premier Lionel Jospin's announced last month that he intended to introduce a new ecotax, driving the cement, metals and aviation sectors into a rage.

For much of industry, the very idea of a tax to reduce emissions is wrong-headed. John Browne, chief executive of the world's number two oil company BP Amoco, has attacked the planned UK tax, describing it as "ineffective and intellectually unjustifiable" and insisting: "To change behaviour, you have to give people an alternative so they can use fuels which are less energy-intensive and so they can find their own ways of reducing emissions."

BP Amoco prides itself on implementing the most ambitious alternative programme on the planet. The firm's 130 operating units now trade emissions allowances. Each is given a greenhouse-gas emissions ceiling but if one can meet the target more easily, it can sell unused capacity to less virtuous units - precisely the type of bartering which the Kyoto accord envisages for countries in a global trading emissions system.

"Emissions trading is the vehicle that will enable us to meet our targets," said BP Amoco spokesman David Nicholas. "We set ourselves a cap of reducing emissions by 2010 to 10% of their 1990 levels and, once you assume how much the company will have grown over that time, that represents a 40% cut."

Article forms part of a survey 'Environment'.