RESOLUTION OF THE ECSC CONSULTATIVE COMMITTEE ON THE PROPOSAL SUBMITTED BY THE COMMISSION FOR A COUNCIL DIRECTIVE RESTRUCTURING THE COMMUNITY FRAMEWORK FOR THE TAXATION OF ENERGY PRODUCTS (adopted unanimously, with one abstention, during the 337th session of 10 October 1997) (97/C 356/03)

THE CONSULTATIVE COMMITTEE OF THE EUROPEAN COAL AND STEEL COMMUNITY

- having taken note of the proposal for a Council Directive restructuring the Community framework for the taxation of energy products (1),

- taking into account the White Paper of the European Commission on an energy policy for the European Union (2), the report from the Commission on the market for solid fuels in the Community in 1996 and the outlook for 1997 (3) and Commission Decision No 3632/93/ECSC on aid to the coal industry (4),

- with reference to its resolutions on the Commission White Paper (5) and on the future of collaborative research in the coal and steel sectors (6),

wishes to put to the Commission, the Council and the European Parliament the following observations on points of principle and subsidiary observations on the proposal for a Council Directive restructuring the Community framework for the taxation of energy products.

1. Observations on points of principle

- The European coal and steel producers as well as the consumers and dealers can claim great achievements and progress in all fields relating to environmental protection, the careful management of resources and energy efficiency. They are firmly committed to the principle of sustainable development. They would also point out that energy is one of the factors determining progress, mobility, growth, employment and the quality of life, and that consequently the useful effects of energy consumption must be taken into account in an appropriate fashion. They wish to draw attention to the fact that the present state of knowledge on climatic conditions advocates a policy of caution which does not run counter to other essential aims of society such as growth and employment. They will in the future, too, support the desire of the European Union to reduce CO2 emissions in line with a programme agreed at world level. They take the view that their past successes are sufficient indication of the fact that their contribution to this programme may be achieved by means other than fiscal and, above all, by agreements negotiated with the authorities.

- Coal-mining and the steel industry in the European Union, together with many of their customers, are particularly hard hit by the proposal for a Directive, which provides for a Community framework with minimum rates for the taxation of energy products,

- the fiscal approach set out in the proposal for a Directive, which aims to address equally concerns relating to the protection of the environment, the functioning of the internal market the lowering of social charges with a view to promoting employment, will not achieve these objectives:

- since this approach aims to introduce minimum rates of taxation on energy products while allowing the Member States a broad measure of flexibility, it is not likely to make for any significant improvement in the functioning of the internal market. Furthermore, the Member States are allowed additional scope for the imposition of exemption from energy tax. Moreover, the principle of fiscal neutrality is not obligatory for the Member States. For these reasons, the distortions between the Member States are increased. The harmonizationof energy taxation to which the EU Commission aspires is not achieved, added to which the proposed refunding of taxes would be administratively onerous for the undertakings and anything but transparent. The remaining net burden would thus still be substantial,

- the fiscal approach proposed by Commission increases the costs of energy products, which are already considerably higher than the costs which have to be borne by the industries of major competing countries. This increase will also affect undertakings in different countries in different ways and thus have a discriminatory impact,

- the proposal for a Directive poses a threat to jobs, first of all directly in mining and in all energy-intensive branches of industry, primarily steel, and then indirectly owing to the fact that industrial customers will atempt to offset the added costs of taxation by rationalizing, which will have an effect on the employment situation. These serious effects on employment are bound to occur, and, regardless of the intended gradual introduction of the tax, the reaction and the impact will be immediate. In contrast, the positive employment effects which the European Union tax proposal expects in the case of a lowering of taxes for example non-wage labour costs, are uncertain and in any case possible only in the longer term,

- if a tax such as the one now proposed were to be introduced, serious social problems would inevitably arise in coal-mining areas, where over 300 000 people are still employed in the mining of hard coal and in related industries. In the European Union steel industry, as well, many of the 600 000 or so jobs which currently depend either directly or indirectly on steel production would be endangered,

- the negative effects on the employment situation in general are all the more serious in that, in energy products are taxed unilaterally, i.e. in the European Union alone, there is a risk that energy-intensive industry, in particular, would relocate away from the European Union. This kind of tax-induced shift of production to third countries which have lower environmental protection requirements would not lead to a reduction in CO2 emissions, but would in fact lead to a deterioration in the global environmental balance. The European Union cannot be impervious to such a development,

- additional tax measures making the consumption of energy in the European economy more expensive are also damaging to environmental policies because they deprive the economy of the resources which it urgently needs for research and investments to improve energy efficiency and environmental protection. It would be more useful from the point of view of industrial and environmental policies for the Commission to back such projects and support the worldwide dissemination of the know-how which the European industry has acquired in the field of the efficient procurement and use of energy,

- the opinions adopted by the Commission, the Council and the European Parliament consider that the competitiveness of the European industry is seriously endangered. For this reason, measures are needed to lighten the tax burden and in some Member States such measures have already been taken, or are still under discussion, to strengthen the industrial base. The guidelines from the Commission aimed at strengthening competition and lowering the prices of energy carried by pipeline are focusing in the same direction. The taxation of energy products as set out in the Commission's proposal for a Directive runs counter to these measures and impairs the competitiveness of the European industry,

- in this connection, the Consultive Committee regrets that the current proposal, unlike previous ones with the same objective, no longer recognizes this fact since it no longer regards the introduction of measures with a similar effect in the industrial areas of the world which are among the Union's main competitors as a precondition for the application of fiscal measures to energy products in the European Union,

- in short, it should be pointed out that unilateral or pioneering action by western Europe will serve no purpose from the point of view of environmental policy and will be harmful for industrial policy as long as there is no good reason to except a coordinated approach by, at least, the most important industrialized countries.

2. Additional comments relating to coal mining

- The European Union's energy supplies are based on a balanced mix of energies, which alone is able to reconcile the energy policy objectives pursued by the European Union Commission and the Member States, namely a secure, competitive and environmentally friendly supply of energy at all times. The Commission's proposal, which is intended to further the harmonization of taxes on energy products, makes it more difficult to maintain the energy mix in the Community and is thus a threat to the Community's chances of achieving recognized energy objectives,

- taxing energy products used to produce electricity, as referred to in Article 13 (1) (b), would considerably reduce the competitiveness of fossil fuels, in particular solid fuels, in the production of electricity and cause distortions of competition in the energy mix within individual Member States and between Member States. The Community coal-producing countries, in particular, would be affected,

- the application of tax exemptions, in particular for energy products from renewable sources and natural gas, in accordance with Article 14 would disadvantage solid fuels, would be discriminatory and distort competition and would run counter to the aims of the European Treaties.

With regard to a tax exemption for natural gas, it should be pointed out that the underlying preference for gas is a reflection of a merely short-term view. This measure would promote precisely that source of energy which, Europe-wide as well as worldwide, has the smallest range of supplies and would mean accepting dependency on purchases of gas from unstable regions of the world.

The European Union's dependency on energy imports will increase substantially, from 48 % in 1990 to a probable 56 % in 2000. An energy tax would increase this dependency alarmingly, since coal is one of the few fuels of which the European Union itself has substantial deposits. In its White Paper on energy policy, the Commission quite rightly warns against growing energy dependency in the Community, which is a 'point of concern`. It therefore urges that 'security of supply must continue to be a constant concern of the public authorities`,

- in its White Paper, the Commission foresees an important market for coal in the Community in the future as well. The Commission considers that coal has an important part to play in the electricity sector. By implementing even more efficient combustion technologies solid fuels are to maintain or even increase their share in the long term. The Community itself will make an 'important contribution` to this via its research policy (7). In the power station sector, improvements can be achieved by further increasing degrees of efficiency and using combined heat and power, which also leads to marked reductions in CO2,

- the European coal-mining industry is prepared to support the development and use of clean power-station and emission-reducing technology. It would be economically sensible and environmentally efficient to promote the use of these techniques by financial assistance and technology transfer also in those countries which produce substantial amounts of electricity from coal but have obsolete power-station technology,

- coal-mining in the European Union is in a very difficult economic situation. In their struggle for survival, the mining companies are directing their efforts towards radical rationalization and cost reductions. The latter are also needed to achieve the degression of aids referred to in the Decision on aid.

The hitherto highly successful efforts of the mining companies are now liable to be overturned, however, by the planned energy taxes, which would send administrative costs, which mining itself cannot influence, soaring.

3. Additional comments relating to the steel industry

- Steel production is energy-intensive. Thus, regardless of changes in energy prices, the European steel industry has always been particularly economical in its use of energy. Hand-in-hand with this, there has been a substantial reduction in the environmental effects of the use of energy: during the past 35 years, CO2 emissions have fallen by almost 50 % per tonne of steel rolled,

- the European steel industry will, in its own interests, continue its efforts to use energy rationally and without harming the environment. Additional tax burdens on energy consumption would not help it to further this aim. Rather, the undertakings would be deprived of the resources which they urgently need for investments to increase energy efficiency and improve environmental protection. These objectives would be better served if the European Commission were to increase the funding available for these purposes under the heading of steel research promotion and were actively to encourage investments targeted for this purpose,

- the Commission's tax proposal contradicts the voluntary,self-imposed commitments agreed in the steel industries of some of the EU Member States to reduce energy consumption and CO2 emissions. It would pull the ground from under these commitments,

- the European steel industry notes that Article 13 (1) (a) of the tax proposal is intended to take account of the particular sensitivity of certain branches of industry, including the steel industry, and exempts the use of certain energy products used for the purposes of chemical reduction, and in metallurgical and electrolytic processes. While retaining its basic misgivings about the energy tax, the steel industry urges that the arrangements set out in Article 13 (1) (a) should be applied to all energy products used in the steel industry in order to avoid distortions of competition between the different steel processes.

THEREFORE, THE ECSC CONSULTATIVE COMMITTEE,

- notes that the Commission's energy tax proposal is not appropriate for any of the objectives which are quoted as the reasons behind the proposal. Instead of harmonizing taxation, fresh distortions are introduced, in competition between energy sources and between national economies, for example. The competitiveness of energy-intensive industry is threatened, and employment and growth in the European Union will decline further. The shift of production to countries which have lower tax burdens will bring about a deterioration in the overall CO2 balance,

- would point out that additional taxes would increase the costs of steel production and have a lasting negative effect on the competitiveness of the European steel industry on world markets. Such a step would do nothing to help the environment,

- would remind the Commission of the energy policy aims set out in the White Paper, namely to reconcile security of supplies, protection of the environment and cost effectiveness. The proposed energy tax would call into question the balanced energy mix and, in particular, disadvantage coal, which is the basic indigenous source of energy,

- would point out that the coal and steel industries are conscious of their responsibility towards the environment. The great successes in all environmental spheres are evidence of this. Coal and steel will continue their efforts in the future as well, if they are not prevented from doing so by taxation. Voluntary commitments are to be preferred to fiscal measures,

- notes that the climate issue must be tackled by a wide-ranging technology offensive. Coal technologies must be further developed and applied, including, in particular, in those countries which have lower standards. The measures already set up to achieve these aims must be reinforced. The introduction of an energy tax would be counterproductive,

- firmly opposes the presented proposal and would encourage the Commission to make the introduction of an energy tax in the European Union dependent on the introduction of measures with similar effect in the other industrial countries which are the European Union's main competitors, in particular the OECD countries. Only if measures are introduced on both sides can the negative consequences of the European Union introducing energy taxes unilaterally be avoided, or at least limited.

(1) OJ C 139, 6. 5. 1997, p. 14.

(2) COM(95) 682 final.

(3) SEC(97) 1093 final.

(4) OJ L 329, 30. 12. 1993, p. 12.

(5) OJ C 232, 10. 8. 1996, p. 3.

(6) OJ C 220, 19. 7. 1997, p. 12.

(7) COM(95) 682 final, p. 22.