Top officials plan to break deadlock over energy tax

Date: 23/04/1998

By Tim Jones

DIPLOMATS have abandoned hopes of putting proposals to tax energy use on the agenda for next month's meeting of EU finance ministers after failing to break a five-year deadlock over the issue.

The British Treasury, under pressure from Deputy Prime Minister John Prescott, called a meeting of national officials last week to try to iron out key technical problems which must be resolved before ministers discuss the proposals.

"This was impossible. We tried to discuss the technical questions and made some progress but, at a certain point, you start to run into political areas," said one diplomat who was present at the meeting.

The failure to break the impasse at last week's talks appears to have dashed hopes that the new Labour administration in the UK would tip the balance among Union governments in favour of energy taxation.

The European Commission first proposed the introduction of a tax on carbon dioxide emissions in 1992 to coincide with the first earth summit in Rio which pledged to keep emissions at 1990 levels.

This proposal failed after EU leaders agreed at the Essen summit in December 1994 to abandon the idea. Instead, they called on the Commission to come up with a plan based on existing harmonised duties on mineral oils.

The next set of proposals ran into stiff opposition from the UK, Ireland, Spain, Greece and Portugal, while Denmark, Sweden, the Netherlands, Belgium, Austria and Germany felt they did not go far enough.

A revised compromise drawn up by Taxation Commissioner Mario Monti a year ago seeks to extend harmonised minimum excise duties to coal, natural gas and electricity while allowing governments to introduce rebates for environmentally friendly energy production.

During last year's Dutch EU presidency, finance ministers agreed to cede technical discussions to their officials in Brussels and discuss only the key political issues themselves.

"This was never going to work," said another diplomat who took part in last week's negotiations.

"Time and again, we found that so long as there was no political will, we would be unable to agree technical proposals."

Most member states agreed there was no point taking the proposal to next month's meeting of finance ministers, and diplomats suggest it is unlikely to be ready for the June meeting either.

"Simply constructing a derogation from the directive poses technical difficulties, but the main element is political since it means judging what is environmentally good and which industries need transitional protection," said one.