EC Delays on EU Carbon Tax

June 25, 2010 International Tax CooperationTaxation in EU

Sunset smokeA European Commission (EC) debate on a proposed European Union-wide Carbon Tax has proven fruitless, with the Commission opting to delay a decision into the future.

On June 23rd the European Commission held an initial debate on a Carbon Tax proposal brought forward by Algirdas Semeta, EC Commissioner on Taxation. The debate resulted in the EC only resolving to engage in an impact assessment of an EU-wide Carbon Tax system, with no headway made towards dismissing the tax or initiating a legislative approval process. A similar assessment had already been held in 2008 for a previous Carbon Tax proposal. Although the EC now deems it necessary to reassess the tax’s impact on the current economic environment.

Despite the lack of results from the debate, Emer Traynor, spokeswoman for Algirdas Semeta, described the meeting as a “…very useful and constructive discussion.” She went on to say that Algirdas Semeta had the general support of other EC Commissioners. Emer Traynor added that throughout the meeting the EC reaffirmed its support for the current EU CO2 Minimum-Taxation Rate, which is designed to deter under-taxation of emissions.

Under Algirdas Semeta’s proposal, a new tax system should be implemented across the EU to cover emissions not currently addressed by the EU Emissions Trading Scheme (ETS), such as those produced by the transport and agriculture sector. A predetermined flat-rate would be charged for emitted carbon gases, with the proposal suggesting a levy of between EUR 4 to EUR 30 per tonne of carbon. In previous statements, Algirdas Semeta indicated his belief that EUR 20 per tone would be an optimal rate.

If upon further reviews the EC decided to pursue the tax, a legislative proposal would be sent to the European Parliament where a unanimous vote would be required to approve the measure. Currently, support for a EU-wide Carbon Tax is conflicted, with some nations supporting the principal but not its proposed implementation. The UK Government has already indicated its apprehension to giving extra tax collection powers to the EU, while maintaining that the issue of environmental legislation needs greater attention. However, the Governments of Italy and France have giving general support to the idea.

Photo by Tambako the Jaguar