EC still divided over carbon/energy tax

Proposals to relieve the four poorest EC countries from immediate application of a carbon/energy tax were unveiled by the European Commission at the Environment Council on 5 October. They appear unlikely to break the deadlock, leaving Member States split down the middle over whether the Community should ratify the UN Convention on Climate Change without an agreement on the tax.

The carbon/energy tax is proving the most intractable issue ever to be tackled in the twenty-year history of the EC's environmental policy. The chances of it ever reaching the statute book receded in May when the UK decided that it had fundamental reservations about the proposal (ENDS Report 220, p 23 ).

Subsequent efforts by the then Danish Presidency of the Environment Council to bully the UK into backing the tax failed to work (ENDS Report 221, p 35-37 ). It also remains clear that France has not given up its demand that the tax should fall only on carbon so as to protect its nuclear industry, while the four so-called Cohesion countries - Spain, Portugal, Eire and Greece - maintain that their energy consumption must be allowed to grow without the burden of a tax so that their economies can catch up with the rest of the Community.

The issue has also got bound up with the EC's ratification of the UN Convention on Climate Change. Germany and the Netherlands led the other six Member States earlier this year in insisting that a carbon/energy tax is essential if the Community is to fulfil its commitment under the Convention to return its CO2 emissions to 1990 levels by 2000, and have threatened to block the ratification process unless the other six come on board.

Belgium took over the Presidency of the Environment Council in July promising "new and imaginative" solutions to break the deadlock. And the Commission said it would come forward with "burden sharing" proposals to meet the objections of the four Cohesion countries.

The Commission's proposal has not been published, but is understood to be based on two criteria. These are the per capita CO2 emissions and per capita GDP of each Member State. The EC average for these criteria in combination was set at 100 in 1990. Member States with a figure below 85 on this index should, the Commission proposed, be relieved of the need to introduce the tax for the time being. This formula neatly excludes the Cohesion countries (see table ).

The second part of the proposal was a formula for lifting these exemptions. This is based on Member States' projections of CO2 emissions to 2000. Eire has said its emissions will increase by 20%, Spain by 25%, and Greece and Portugal by 35-40%. The Commission has suggested that they should introduce the tax once their emissions have risen half-way towards these projected levels - with the final decision on timing being taken by qualified majority vote.

Reports of the Cohesion countries' initial reactions to the proposal vary widely. Some say that they remain unwilling to introduce a tax at all, even if it might be several years off. But Environment Commissioner Ioannis Paleokrassas claimed after the Council that the proposal had been "favourably received".

The objections of the UK and France still remain in place. Environment Minister Tim Yeo reaffirmed the UK's hostility to the tax after the Council, though conceding that it is "an issue which is not going to go away."

Meanwhile, the Belgian Presidency's promise of new and imaginative solutions has yet to be fulfilled. And its plan to move the negotiations along at a joint Council of Finance and Environment Ministers in late November also appear to have been put on ice.

That leaves the issue of the EC's ratification of the UN Convention. The expectation is that the Belgian Presidency will endeavour to split this off from the carbon/energy tax at the Environment Council in early December.

Resistance is likely from Germany and the Netherlands, but the Germans are in a difficult position. They want to host the first meeting of parties to the Convention in spring 1995, but their bid will not be credible if Germany itself does not ratify, and soon. The meeting of parties is due 12 months after the treaty enters into force, which will happen 90 days after the 50th ratification. A total of 36 countries have ratified to date.

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