Carbon friendly industrialists

No proposal from the European Commission during the twenty years of the EC's environment programme has provoked such intense opposition from industry as last autumn's outline ideas for a carbon/energy tax. Major energy consumers have allied with the coal, oil and electricity industries to issue dire warnings about the implications for the EC's competitiveness and the security of its energy supplies. At the same time, sectors have warned that they will not proceed to meet voluntary energy efficiency targets if the tax is implemented unilaterally, and individual companies have threatened to close down plants in the Community and switch investment to more carbon-friendly regions.

The evidence is beginning to suggest that the case against the tax is being wildly overstated (see pp 14-16 ). Modelling work by Shell and others has concluded that, if energy-intensive industries were not exempted from the tax, their production costs would rise by more than 1-2% in only one case once it was fully implemented eight years hence - and that on pessimistic assumptions. Their international competitiveness might eventually suffer, but the extent to which it did so would depend crucially on how the tax revenues were recycled. As far as other industries and general economic welfare are concerned, the models suggest the tax would have minimal overall impact - though again, this would depend on what national treasuries do with the revenues.

The hard truth is that a shift to a less carbon-intensive economy will not occur unless some sectors - principally steel, coal and non-ferrous metals - suffer pain. Their voices are being heard because the sectors which stand to benefit - or at least not to lose - either feel themselves not to be under threat or are too small and fragmented to put their case across effectively. This is particularly the case with the agglomeration of businesses which offer energy conservation services and the infant renewable energy sector.

Major energy users are in any event missing a trick. A key component of the Commission's proposals - and a central influence on the impacts of the tax - is that Member States would be obliged to ensure that the tax had a neutral effect on the overall fiscal burden. The energy-intensive sectors have occupied themselves so completely with opposing the tax on principle that they have made virtually no contribution to the debate on this crucial issue.

One matter on which industry has made itself heard over the years is the scale of the energy subsidies given to their competitors in the EC and the divergences in energy taxes between Member States. Both taxes and subsidies can have legitimate social and strategic objectives, but in many cases they are simply the unthinking products of history and the desire of national treasuries for any source of revenue they can lay their hands on. A review of these instruments from an environmental perspective is long overdue - and industrialists would do well to consider how they can make themselves more environment-friendly by assimilating that perspective into their present lobbying efforts.

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