The use of tax to achieve environmental goals (by means of 'green taxes', CO2 tax, vehicle taxes, tax incentives) has been at the centre of discussions since the early 1990s.
The June 1992 UN Conference on the Environment and Development in Rio (the 'Earth Summit') called for a global strategy to reduce greenhouse gases, including the use of economic instruments. At the time, the Commission had proposed a new harmonised carbon and energy tax aimed at stabilising CO2 emissions in the Community in the medium term. Even after amendment, however, the proposal met consistent opposition and the Council of Economics and Finance Ministers (ECOFIN), considering that unanimous agreement was out of reach, asked the Commission to table another proposal based on the current system of excise duty for mineral oils.
The proposal submitted in 1997 (COM(97) 30 - for more detailed information see press release ) reflected environmental concerns but was essentially shaped by the need to ensure that the internal market operated correctly. It eventually paved the way for agreement in the Council of Ministers on 27 October 2003 on a Directive which widens the coverage of the Community framework, previously limited to mineral oils, to all energy products including coal, natural gas and electricity and increases the relevant Community minimum rates of taxation.
In particular, the Directive is designed to
- reduce distortions of competition that currently exist between Member States as a result of divergent rates of tax;
- reduce distortions of competition between mineral oils and the other energy products that have not been subject to Community tax legislation up to now;
- increase the incentive to use energy more efficiently (so as to reduce dependency on imported energy and cut carbon dioxide emissions); and
- allow Member States to offer companies tax incentives in return for specific undertakings to reduce emissions.
The Directive entered into force on 1st January 2004 - for more detailed information see press release .
You will also find on this website an overview of the excise duty rates currently applicable to energy products and electricity along with background information in our "Studies and reports" section.
For legislative provisions allowing individual Member States to apply reduced rates of excise duty to mineral oils for limited periods of time in view of specific policy considerations see also Directives 2004/74/EC and 2004/75/EC.
More information on energy taxation and the environment can be found:
- under the 'Energy and environmental taxation' section of the Communication from the Commission on "Tax policy in the European Union - Priorities for the years ahead" (COM(2001) 260 final)
- 'State aid: key elements for the agreement in the Council on energy taxation ', an article from the EC Competition Policy Newsletter 2003 - Number 3 - Autumn.