Writing in the Observer on Sunday, Mr Mandelson claimed that: 'there is a good intellectual and national interest case for environmental tax harmonisation, given the competitiveness problems that the climate change levy is posing for British firms.'

However, this is likely to raise the hackles of prominent eurosceptics, many of whom have been sent screaming from rooms by the mere mention of the words 'tax' and 'harmonisation' in the same sentence. The former Northern Ireland Secretary argued that such a move would prove that Europe is serious about the Kyoto agreement, and suggested that the additional revenue raised by a 'green' EU tax could be used to develop and promote the knowledge economy.

In the run-up to the EU summit at Laeken in Belgium, Mr Mandelson also argued for closer integration within the european community on a broader level, stating in his Observer article that 'there must be some limits' to the rights of member states to undercut each other on taxes in order to entice lucrative multinational companies to invest or locate in their country.