EUROPEAN COMMISSION DIRECTORATE GENERAL TAXATION AND CUSTOMS UNION The perspectives of applying ecotaxes in the EU. Christos LIOLIOS BERLIN,

Environnemental taxes – Background Information n The main purpose of taxation is to raise revenue for the national budget. n Article 93 of the EC Treaty provides that tax legislation requires unanimity at the Council. n Main driver forces in the area of taxation: n Good functioning of the Internal Market n Promote sustainability n Some harmonised Community rules on taxation of mineral oils were first introduced time by Directive 92/81/EEC. n Taxation and tax differentiation proved to be very efficient tools to promote fiscal and other Community policy objectives (internalise external costs).

Instruments used to promote Environmental Policy n Traditionally technical regulations n Recently (mainly after the 1992 –Rio Conference) the so called Market Based Instruments (MBI), which include: n Environmental Taxes (ET) n Green House Gas (GHG) Emission Trading allowances n Voluntary Agreements n Other (green certificates, subsidies, incentives,…) n Recent Community initiatives in the area of ET: n The 1992 Proposal for a Community CO2/energy tax n The 1997 Proposal on taxation of energy products (Directive 2003/96/EC) n The 1997 Communication on ET and Charges(COM(97)9)

Directive 2003/96/EC on taxation of energy products and electricity n Community framework for the restructuring of the taxation of energy products and electricity n All energy sources are covered (except for peat) n Increase in existing minimum rates (mineral oils) and new positive minimum rates for electricity, gas and coal n Few compulsory exemptions (international aviation but not intra-EC). n Facultative tax differentiation measures for household consumption, renewables, energy intensive companies n Possibility of further tax differentiation - similar to Art 8(4) derogations n Specific rules for electricity, natural gas and coal.

Competitiveness issues in Directive 2003/96/EC n Differentiated rates for Business and non business use. n Energy products used for Industrial Processes, are left outside the scope of the Directive n Definition of Energy intensive companies (EIC) (purchases of energy products and electricity amounts to at least 3.0% of the production value, or national energy tax payable amounts to at least 0.5% of the added value) n Voluntary agreements: EIC: 0 rate - non EIC: 50% min rates n Future initiative: consistency between emissions trading and taxation needs to be further examined, following adoption of Directive 2003/87/EC, establishing a scheme for Greenhouse Gas Emission (GHG) allowance trading n Preparatory work for a Communication is currently underway

Perspectives for further Community action n The 6th Environmental Action Programme, adopted in 2002, recommends the use of the most effective MBI to achieve Community's Environmental Objectives. n All possibilities provided for under Directive 2003/96/EC (for tax differentiation, use of renewable energy sources, etc), should be used in an optimal manner. n Propose new Community legislation in areas having a serious environmental impact and particularly that of passenger cars (new Proposal by end of 2004). n Increase legal certainty particularly concerning the consistency between tax measures, State aid rules and emission trading, by means of: n applying the 2001 Community rules on State aid for environmental protection. n (eventually) propose legislation aiming at enhancing the consistency between the emission trading Directive and the Energy Tax Directive.