Kovács turns tax spotlight to saving the environment

The European Commission is to turn the spotlight on environmental taxation, with a conference on 19-20 March and the publication of a green paper one week later (28 March).

The idea of tackling climate change and pollution by increasing taxes on environmentally damaging products and activities has risen up the political agenda in recent months.

Enterprise Commissioner Günter Verheugen and the French government last year both came out in favour of a border tax on imports from countries with no binding targets for reducing carbon dioxide emission. Car industry group ACEA this year called for a tax shift to boost the sale of cleaner cars, rather than relying on technological changes.

A green paper from the Commission’s environment and taxation departments will start a debate on environmental taxes with an overview of existing market-based mechanisms, including taxation and trading certificates. The paper is expected to suggest areas in which taxes could benefit the environment.

But it is unlikely to propose concrete fiscal measures because of member states’ reluctance to take tax decisions at EU level. Tax measures proposed by the Commission have to be agreed by all member states.

"We think this is an interesting topic in relation to climate change and sustainability," said a spokeswoman for László Kovács, commissioner for taxation and customs union. "We want to see how the Commission can help."

Environment Commissioner Stavros Dimas said carbon trading had already shown itself to be a good example of using the market for the environment. "We need to look at ways to extend this approach to make environmental policy more cost-effective and efficient," he said.

‘Taxation for sustainable development’ has also been chosen as the subject for the first Brussels Tax Forum - a conference Kovács plans to turn into an annual event, with a different theme each year.

The taxation commissioner will open the conference with Dimas and Commission President José Manuel Barroso.

Kovács’s spokeswoman said that "some fine tuning" to the green paper was possible when expert opinions had been heard at the conference.

Experts from the European Environment Agency (EEA), a Copenhagen-based Commission advisory body, will address the conference.

David Gee of the EEA said that objections to a fiscal approach to environmental problems were often over-stated. In particular, he said, fears that taxation would put people off paying for polluting products and services and wipe out revenue ignored the scale of the problem.

"If you start off with a large tax base," said Gee, "for example from transport or energy, then the revenue base will remain stable even if the price per unit is raised through taxation."

He said that a study published last year by the Organisation for Economic Co-operation and Development found taxes had no overall effect on competitiveness.

The EEA advocates an overall shift in taxation, from labour to resources. This would see energy and pollution taxed more heavily than income.

Lobby group the European Environmental Bureau (EEB) says the EU should aim for a 10% tax shift from labour to resources over ten years.

John Hontelez, secretary-general of the EEB, called on the Commission to make the green paper as specific as possible. "We need some very concrete conclusions on how the EU can stimulate an efficient use of fiscal instruments to encourage environmental good practice," he said.

The European Commission is to turn the spotlight on environmental taxation, with a conference on 19-20 March and the publication of a green paper one week later (28 March).