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Now Italy prevents energy tax agreement - EEB

19 February 2003, 18:04 CET

The European Environmental Bureau (EEB) deplores the fact that EU Finance Ministers again did not reach an agreement yesterday on the Commission's energy taxation proposal. This time it was Italy opposing the compromise, carefully drafted by the previous Danish Presidency, stating that it does not want to end its tax breaks on diesel for commercial use. Such tax breaks, however, are now unlawful, since their exceptional authorisation period has expired.

John Hontelez, Secretary General of the EEB, the largest federation of environmental organisations in Europe, said: "Several Finance Ministers, and now in particular the one from Italy, show that they do not respect the decision of their Prime Ministers who agreed in Barcelona, in the European Council, in March last year, that the energy taxation directive was to be agreed by the end of 2002. More-over, despite solemn declarations, they continue to show their indifference to the essential role taxation can play to let the market work for the environment. In this way they are preparing for a major embarrassment for the EU and its Member States in the near future. Without a major tax reform, leading to
less taxation on labour and more on energy use, the Kyoto targets for the EU will not be reached!"

The next EcoFin meeting on March 7th is the last opportunity for the Fifteen to agree before the Accession countries participate in the discussions of the Council (from mid-April). Nevertheless, at every meeting, when unanimity seems within reach, a new opposition emerges. "The problems are exaggerated. This text could have already been adopted long ago" continues John Hontelez. "Member States must show some minimum willingness for compromise. This clearly shows the limits of unanimity voting and calls for the Convention to emphasise on the necessity to extend qualified majority voting, notably in the taxation areas linked
to the environment. Without such change, no progress will be possible in an EU with 25 members".

The energy taxation proposal has been negotiated since 1997. It is widely recognised, by Finance Ministers themselves , that the Union needs minimum harmonisation for energy taxation. The urgency of environmental degradation, the EU's Kyoto commitments, the Community Sustainable Development Strategy, the Union's international profile on
environmental issues and also a better functioning of the internal market, all require minimum harmonisation for energy taxation. "This text, much weakened after years of negotiations, would have little impact for most existing Member States" says John Hontelez "but we need an update of the minimum Community rates and the introduction of minimum
rates on electricity, gas and coal before the enlargement". The EU must equip itself with a common framework on energy taxation before the enlargement. Without this directive, the energy price distortions in the enlarged internal market will be even more important. Also, agreeing on such a framework may be even more difficult with 10 new members. Furthermore, the tax increases currently negotiated would have substantially greater environmental impact, if not in the current Union, in the new EU countries.

The EEB sees an EU agreement on energy taxation as a first step towards "getting the prices right" (as requested by the Gothenburg European Council of June 2001), for helping to achieve the EU's Kyoto target of a 8% cut in CO2 emissions, and for Environmental Fiscal Reform (EFR). EU minimum energy taxes, including electricity, gas and coal, will enable
internal market efficiency and further progress on EFR at EU and national levels. The fiscal neutrality of the new taxes can even help in boosting job creation, if the tax revenue is recycled towards cuts in labour taxes, as recommended in the 1997 original text.

The EEB sees this directive as a minimum step forward for the EU. But more dramatic changes are needed to ensure that in the future the market no longer promotes unsustainable production and consumption patterns. This is why the EEB has launched a campaign to change market incentives in order to make prices work for the environment. In its campaign for
Environmental Fiscal Reform, the EEB demands an additional 10% tax shift from labour to environmental use by 2010. Such a shift is revenue neutral, and would help to protect both the environment and employment. The EEB also demands a removal or reform of all environmentally adverse subsidies, and a number of other measures.

The European Environmental Bureau is a federation of more than 130 environmental citizens' organisations based in all EU Member States and most Accession Countries, as well as in a few neighbouring countries.

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