EU eyes tax as tool in climate change fight
19 November 2020 | Markets
Taxation will not escape the European Union’s plans to curb planet-warming emissions, and levies should be revamped to reflect climate and environmental costs, the head of EU climate policy said.
Brussels is planning a far-reaching overhaul of policies including Europe’s carbon market, farming subsidies and CO2 standards for cars as it seeks to slash EU emissions to ‘net zero’ – meaning that all emissions must be offset in full by absorption measures – by 2050.
As part of those plans, the European Commission will revise EU energy taxation rules by next summer.
Commission Executive Vice-President Frans Timmermans said on Monday the bloc needs to rectify the current system, where taxes reflect the cost of making and transporting a product but fail to account for its toll on the environment.
“At some point, we need to make sure that our carbon footprint is fully reflected in our taxes,” Timmermans told the online European Business Summit.
“I say this fully knowing that this is very often (the responsibility of) national policy. But if you want to be consistent on this, and you want us to go into a circular economy, you will have to think about changing the tax system.”
Some countries have introduced national environmental taxes. The Netherlands will next year impose CO2 taxes on industry and increase ticket taxes on flights to close the gap in affordability between plane and train tickets.
Meanwhile, EU countries have agreed to a bloc-wide tax on non-recycled plastic waste, and the Commission has said it is considering a jet fuel tax to promote a cut in aviation emissions.
However, changes to EU taxation rules need approval from all 27 member countries, making them difficult to pass.
The EU currently sets minimum excise duty rates for member countries to apply to fuels such as gas and coal.
Changes to fuel taxation in particular may face resistance from countries and companies concerned that higher carbon-based taxes will make their products more expensive, or hurt consumers – although advocates say revenues from carbon levies can be used to support vulnerable citizens and fund low-carbon projects.