EC Increasingly Looking To 'Green Taxes'

by Ulrika Lomas, for LawAndTax-News.com, Brussels

30 March 2007

The European Commission announced on Wednesday that it has adopted a Green Paper on the use of market-based instruments for environment and energy related policy purposes.

The EC argues that since market-based instruments have proven to be cost-effective means of achieving policy goals, the paper aims to stimulate a broad public debate on how taxes, tradable emissions rights and other market-based instruments can be used more widely and effectively for environmental and energy policy purposes at Community and national level.

Environment Commissioner Stavros Dimas observed that:

"Market-based instruments such as emissions trading, environmental taxes and targeted subsidies harness the power of market forces to protect the environment. This more flexible and cost-effective approach has proved its value but it is still underutilised. In launching this Green Paper our goal is to promote the use of market-based instruments whenever they are appropriate to the circumstances so that Europe's environment is protected most effectively."

László Kovács, the Commissioner responsible for Taxation and Customs Union added:

"Fiscal policies will have an important role to play in the delivery of the ambitious objectives endorsed by the last European Council." He added: "Taxation should in the first place discourage what is undesirable rewarding at the same time all sorts of positive behaviour, being it energy savings or environment-friendly activities. Tax revenues can then be used to favour economy-friendly activities, such as innovation or jobs."

The Green Paper covers a wide range of areas in which market-based instruments (mainly taxes, emissions trading rights) can be further promoted, in particular in energy use, transport's impact on the environment and in other specific areas of environmental policy such as sustainable management of water, waste management, protection of biodiversity and reduction of air pollution.

In particular it focuses on possible ways forward to make the Energy Taxation Directive more directly supportive of the Community's energy and environmental objectives.

The Green Paper also suggests the creation of a new forum that could encourage and facilitate exchanges of experience and best practice between Member States on the use of market-based instruments and co-ordination of national approaches as well as national experiences with Environmental Tax Reforms.

The Green Paper concludes that there should be an increased use of market-based instruments to achieve environmental and other policy objectives, both at Community and national levels. The Commission is inviting reactions to the Green Paper from other EU institutions, Member States, all stakeholders and the public.

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