COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(92) 246 final 
Brussels, 1 June 1992 
COMMUNICATION FROM THE COMMISSION 
A COMMUNITY STRATEGY TO LIMIT CARBON DIOXIDE EMISSIONS 
AND TO IMPROVE ENERGY EFFICIENCY 
GENERAL PRESENTATION : OBJECTIVES AND COMPONENTS OF THE COMMUNITY 
STRATEGY 
THE PROBLEM 
Emissions of carbon dioxide (C02), which come primarily from the 
use of fossil fuels, were recognized as the principal cause of 
global warming, since they account for 61% of greenhouse gases. The 
considerable risks which could result from this for the planet 
were identified by the Intergovernmental Panel on Climate Change 
(IPCC), which presented a first report In 1990. A modification of 
overall climatic equilibrium would have an impact on ecosystems, on 
the habitats and on species. By a rise in the level of seas and 
oceans, by the changes in rainfall patterns or by the Increase in 
climatic instability, the greenhouse effect would affect the 
availability of water reserves, crop yields, erosion and 
desertification processes... It would therefore have a direct 
impact on numerous human activities with important social and 
economic consequences. The negative impact would particularly 
affect countries already affected by lack of development. 
2. The importance of the potential risks for humanity of the 
greenhouse effect, as well as the very long lead-times necessary 
to reverse the tendencies with regard to the emissions which are 
the cause of It, or to neutralise its Impact, make the rapid 
implementation of tangible and effective action essential. It must 
be avoided at all costs that In the management of the environment 
and of the use of the natural resources a short-sighted attitude 
should irreversibly affect the "natural capital" which we have 
inherited, to the detriment of our children and of the generations 
to come. 
3. At present, it is the industrialised world which is mainly 
responsible for CO2 emissions. The share of the Community In 
world emissions is 13%, that of the USA 23% and Japan 5%. Central 
and Eastern European countries and the CIS contribute to the extent 
of 25%. The developing countries, whose contribution has remained 
small until now, is expected nevertheless to experience the most 
rapid increase during the years to come. It Is therefore necessary 
that all countries, developed or not, take part in the effort to 
control CO2 emissions. On the basis of emissions in tonnes of 
carbon per capita, the Community and Japan (2.4 tonnes of carbon 
per capita) are distinctly better performers than the Central and 
Eastern European countries and the CIS (3.63) and, moreover, than 
the USA (5.4). Community per capita emission levels are 
nevertheless twice the world average (1.13). As the foremost 
economic and commercial power, the Community ought, then, to 
recognise Its responsibilities and continue to lead by example In 
order to bring on board, through common efforts, both 
industrialised and developing countries. 
THE OBJECTIVE 
4. The Community has already decided to stabilise Its emissions at 
their 1990 level by the year 2000(1). All the developed countries 
seem ready now to follow the lead of the Community In this 
respect. It Is Important, on the eve of the United Nations 
Conference on the Environment and Development (UNCED), that the 
Community as well as all developed countries take the measures 
necessary to respect this commitment; they have, moreover, to be 
ready to give to the developing countries the financial and 
technological aid which they need to take the same measures 
without harming their development prospects. 
THE MEANS 
5. To stabilise C02 emissions within the necessary time, a 
reduction In the energy demand Is required as well as an increase 
in energy efficiency and a modification of the energy sources 
used. This objective involves therefore all households and 
companies and can only be achieved effectively by stimulating 
technological as well as transport and energy Infrastructure 
development at the same time and by changes In behaviour. The 
measures which make up the Community strategy, as outlined in the 
Commission working paper of December 1990 and subsequently in a 
more elaborate form in the Communication of the Commission of 
14.10.1991, *1^ answer this need. 
6. As regards technology and Infrastructure, a number of initiatives 
(research and development, in particular the JOULE programme-, 
THERMIE, SAVE and ALTENER programmes; green paper concerning the 
impact of transport on the environment*2)) aim to encourage the 
development of non-polluting alternative energy resources, to 
strengthen energy efficiency of Industrialised domestic 
facilities, to promote transport Infrastructures respectful of 
the environment as well as to optimise techniques concerning 
conservation and energy saving. As far as SAVE is concerned, the 
Commission herewith submits to the Council a proposal containing a 
series energy conservation measures concerning the energy 
certification of buildings, energy audits for entreprlses, the 
real billing of energy consumption, the creation of periodical 
inspections of heating Installations and cars, Insulation of 
buildings and third party financing. As far as ALTENER is 
concerned, the Commission proposes a budget of 40 MECUs over 5 
years to finance actions to promote renewable energy sources. 
(1) Joint Council energy / environment of 29.10.1990 
(1) SEC (91) 1744 final of 14 October 1991 
(2) COM (92) 46 final 
- 3 -
As regards changes in behaviour, Instruments based on market 
mechanisms prove the most effective In terms of results and 
costs. The Commission therefore transmits to the Council a draft 
directive Inaugurating a Community carbon/energy tax. The 
proposal for a directive follows the main lines Indicated In the 
Communication of October 1991. It concerns a tax which is 
modulated for 50% according to energy content and for 50% 
according to the carbon content of the used primary energy. The 
tax would be introduced gradually $3 per barrel of oil 
equivalent In 1993 and, during the subsequent years, an additional 
$1 per year rising to $10 In the year 2000. The tax revenue would 
go to the Member States. The energy component of the tax has the 
purpose of acting through Its Impact on prices as an incentive on 
households and companies, to a more rational use of energy. The 
CO 2 component aims, on the other hand, to increase the 
competitiveness of energy sources, In particular of renewable 
energy sources, which prove most favourable in view of the aim of 
stabilisation, and therefore to stimulate their development for 
both domestic and industrial uses. 
8. This involves a number of complementary measures, which are likely 
to reinforce each other; this mutual synergy is a major element 
for reaching the objective in an efficient way. 
The proposed measures, which aim Initially to reduce CO2 
emissions, were conceived In order also to yield other positive 
consequences for the Community economy. In effect, these measures 
will contribute to improving energy security in the Community, 
to reducing the polluting emissions other than C02, to 
encouraging more effective use of transport infrastructure and 
developing means of transport respectful of the environment. They 
can also contribute to increasing the competitiveness of European 
industry and to endowing It with a store of products and 
production techniques which are not harmful to the environment, 
the demand for which is expanding considerably. 
10. To best exploit the positive potential of the measures envisaged, 
while minimising temporary costs following the adjustment process, 
It is important that the methods of implementation of the 
carbon/energy take account of certain constraints. Firstly, the 
introduction of the new tax should not result in a net Increase in 
the overall fiscal burden . The tax, which will be collected by 
the Member States and which will go towards national budgets, 
should be neutralised by fiscal incentives and reductions In tax 
and social security charges for the benefit of the companies and 
households concerned. In this way, the Commission proposal, which 
would not involve any Increase in overall taxation, should 
result In a progressive tax adjustment, intended to increase 
coherence with environmental imperatives. Secondly, account will 
have to be taken of the Impact of the measure on the 
competitiveness of Community companies, If competing countries 
other than those considered in the general conditional Ity clause 
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(see paragraph 28) do not subject their own companies to 
equivalent changes. In this case, the proposal foresees a tax 
reduction, gradual and In stages, for companies whose energy 
consumption, expressed as a percentage of value added, exceeds 8%, 
as well as the possibility of granting temporary exemptions to 
companies undertaking substantial efforts to Improve energy 
efficiency or to limit CO2 emissions. 
11. AM the measures proposed by the Commission are underwritten by a 
mechanism which ensures the monitoring of the Implementation of 
the strategy as a whole. This mechanism will make It possible to 
follow up and monitor the efficiency of the measures, both In the 
Community and nationally. Equally, It will allow adjustments which 
may prove desirable or necessary, due to the economic evolution 
within the Community and on the International level, as well as 
progress made towards the stabilisation target, by making sure in 
particular that the required effort takes account of the economic 
constraints of the Member States. 
12. The attached proposals allow the implementation of the strategy 
defined in the Communication of the Commission of October 1991. 
They constitute the response to the Energy/Environment Council 
which, In its session of 13 December 1991, asked the Commission 
"to put forward formal proposals for concrete measures arising 
from the Community strategy, including any necessary proposals for 
Community-wide taxation". 
The fiscal and non-fiscal proposals are presented in detail in the 
corresponding documents. As a complement to those proposals, the 
Commission also investigated certain aspects, of which the main 
elements are developed below. They concern : 
the environmental, energy, economic and social impact of the 
proposed measures; 
the burden sharing between Member States; 
the envisaged reaction to cope with problems of competition 
the Community industry could be confronted with; 
the attitude of the Community towards the economies in 
development and in transition. 
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ENVIRONMENTAL. ENERGY. ECONOMIC AND SOCIAL IMPACT OF THE PROPOSED 
MEA3J1BES 
13. The proposals submitted for adoption by the Council were conceived 
as a whole. As was underlined above in point 8, the efficiency of 
the various measures very largely depends on their reciprocal 
interaction. Thus, the technological component of the Community 
proposals will not result In the full deployment of the desired 
multiplier effect on national or private Initiatives, without the 
catalyst effect and the stimulation arising from the progressive 
introduction of the new carbon/energy tax. 
14. In addition, these proposals prove complementary to other 
initiatives which have already been the subject of Commission 
proposals. As an example, the action of the carbon/energy tax, 
as well as the ALTENER programme for the development of certain 
renewable energy sources, will prove considerably strengthened by 
the Commission proposal concerning the reform of the CAP*1)-
whlch foresees the use of land withdrawn from production for non­
food uses and which will lead to a lowering of the prices of 
certain agricultural raw materials which could be used to produce 
bio-carburants - as well as by the proposal for a Directive on 
excise duties on motor fuels from agricultural sources*2). 
15. Moreover, given that most proposed measures will have a gradual 
Impact, spread out in time, the efficiency of the action In 
pursuit of the stabilisation target will Inevitably depend on the 
speed with which they will actually be implemented. In view of 
this, the estimates of the Impact of the various measures should 
only be considered as approximate, as the application will depend 
on the Council having the political will to adopt, within a 
reasonable time, all the measures envisaged. 
a) Environmental Impact 
16. According to the latest estimates, Community C02 emissions could 
increase, in the absence of new stabilisation measures, by at 
least 12% between 1990 and 2000. From the simulations carried out 
by Commission services, the proposed non-fiscal measures, if 
Implemented in optimum conditions and in view of their educative 
effect for national initiatives and on companies (in particular 
through an accelerated introduction of the best available 
technologies), could contribute to reducing this increase by 
5.5%, which would reduce the Increase In emissions to 6.5%. This 
contribution would result In : 
new activities foreseen as part of the THERM IE programme, 
which could reduce C02 emissions by approximately 50 million 
tonnes, which accounts for 1.5%; 
(1) COM (91) 379 final of 18.10.1991 
(2) COM (92) 36 final of 28.02.1992 
6 -
proposals concerning the implementation of the SAVE programme, 
which could contribute to a reduction of approximately 3%. 
the ALTENER programme, which would reduce emissions by one 
additional percent. 
With regard to the fiscal measures and complementary national 
measures, they would be required to contribute a reduction of 
approximately 6.5% towards the stabilisation target. 
b) Energy Impact 
17. As has already been underlined In the Communication of the 
Commission of October 1991, most of the effort with regard to the 
reduction of C02 emissions between now and the year 2000 would 
result from the reduction In the energy demand as well as in the 
improvement of energy efficiency. It is considered that 
achievements in this field could contribute by approximately 85% 
to the global stabilisation effort. As regards substitution by 
alternative energy sources, It is considered that for technical, 
economic and political reasons major results will not be achieved 
between now and the year 2000. In the case of renewable energy, 
ALTENER is expected to achieve its main effect only after the year 
2000. 
18. As regards other energy sources, the contribution of nuclear and 
hydro-electric power would remain practically unchanged. One 
could, on the other hand, expect a certain structural reduction 
In the use of solid fuels which, In the absence of the option of 
nuclear power, would be replaced mainly by gas. This evolution 
could reduce the share of solid fuels from 24% to 22% of total 
consumption and increase the share of gas from 18% to 22%. The 
part played by oil, which has suffered a certain erosion following 
competition from solid fuels, should, conversely, stabilise at 
around the current 43% level. The actual application of these 
developments will depend however on several factors and in 
particular on the taxation modalities applied to electric power, 
on the effective liberalisation of the market In this sector and 
on the regime which will actually be applied to Industries with 
high energy consumption. It will depend equally on how much the 
tax, differentiated according to carbon content, will be actually 
reflected In the prices at consumer level. 
c) Economic Impact 
19. The envisaged measures will encourage a more rational use of 
energy and will result In important benefits for the Community 
economy. The benefits for the economy will be particularly 
significant If, as a consequence of the fiscal neutrality, the 
Member States would adapt their tax structure in a way which would 
underpin economic efficiency. The rationalisation process 
Involves however, in the short term, adjustment costs both at 
macro-economic level and at the level of companies. The macro-
economic Impact, as regards economic activity, employment and 
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inflation, will be In all probability low, on condition however, 
that a number of factors are taken Into account. First of all, 
the fiscal neutrality of the tax. In fact, tax reductions can 
contribute to rectifying the negative impact on economic 
activity. Secondly, the adjustment costs will be reduced if one 
can exploit the capacity of market flexibility, i.e. through the 
introduction of the tax In a gradual and foreseeable way. In view 
of the effectiveness of the measures, the tax neutrality has to 
take into account also the envisaged stabilisation objective. In 
this respect, the important share of emissions growth from the 
transportation sector in the Community has to be taken Into 
consideration. The Implementation of concrete measures therefore 
has to allow a favourable treatment of this sector as far as 
positive Incentives following the fiscal neutrality are concerned. 
20. The probable impact of the tax on the various industrial sectors 
depends not only on the Intensity of energy production in these 
various sectors; but also on the intensity of international 
trade, on the activities undertaken by our commercial competitors 
within the framework of their reduction strategies, as well as 
within the framework of the elasticity of demand to price 
Increases. For the greater part of manufacturing industry, 
covering roughly 85% of industrial employment, the cost of 
energy accounts for only 0 to 5% of total production costs. There 
Is however a small group of sectors, some of which are exposed to 
International competition, which could be potentially affected 
to a larger extent. The introduction of a carbon/energy tax 
introduced according to the principle of fiscal neutrality, could 
be reflected In a relatively large increase in production costs 
for the industrial sectors with high energy use, by a moderate 
Increase, or even by a reduction in the production costs for 
other Industrial sectors, and by a fairly significant reduction In 
the price of services. The proposal therefore foresees that 
companies belonging to sectors with a high level of energy 
consumption open to competition from countries which have not 
adopted a similar tax or measures with an equivalent effect could 
benefit from a total or partial exemption In exchange for specific 
agreements. Those companies could also benefit from progressive 
tax reductions according to the share of energy In total value 
added. 
d) Impact on households 
21. Households' purchasing power will be affected directly by the tax 
Increase on private purchases of domestic energy and fuel, and 
indirectly by the effect of the tax on Industrial production 
costs. The Immediate Impact of the carbon/energy tax will depend 
on the current structure of expenditure patterns. In this context, 
it is appropriate to note that the impact of a tax of $10 per 
barrel of oil equivalent would account for 0.5 to 1.3% of total 
household expenditure. 
22- The data available roveai that low-income households tend to 
devote a relatively higher share of their budget to the direct 
purchase of domestic energy than the more well-off households. It 
Is, however, the reverse for motor fuel. In view of these 
contradictory tendencies and starting from the assumption that 
expenditure patterns will not change, the regressive effect of the 
carbon/energy tax would be very small. It must nevertheless be 
stressed that the real impact of the tax on the various categories 
of households will depend on the modalities of the fiscal 
neutrality applied by Member States, as well as on the actual 
benefits following the more rational use of energy and the 
favourable Impact of this rationalisation on the environment. It 
is of particular Importance to take into account in the 
neutralisation of fiscal revenues, the situation of low income 
households. 
THE BURDEN SHARING 
23. The economic Impact of the adjustment process connected with the 
introduction of the measures envisaged should be distributed in a 
relatively balanced way between Member States, with respect to the 
conditions Indicated in paragraph 19. In a given country, low per 
capita emissions often reflect a relatively low economic 
development level. This often goes together with very high 
emissions per unit of energy or per unit of product (GDP). 
Accordingly, the improvement of energy efficiency and the 
rationalisation process which follows from It will have an 
important positive effect in these countries. Problems could only 
arise if the economies of the countries concerned did not have 
the flexibility necessary to absorb the costs imposed by the 
adjustment process in the short run. 
24. The equilibrium between countries will depend also on the efforts 
decided by the Member States at the national level. In this 
respect, it should be stressed that most Member States whose per 
capita CO 2 emission level is higher than the Community 
average, have decided to put into effect measures at the national 
level going beyond that which Is necessary to reach the 
stabilisation of emissions target for the year 2000. The proposed 
carbon/energy tax proposal will also enable those countries to 
apply a rate higher than the minimum rate defined at the Community 
level. 
25. It Is difficult at this stage, however, to estimate with precision 
the real costs of the adjustment process in each country. These 
costs will be evaluated regularly by the Commission using the 
general monitoring mechanism as well as the specific monitoring 
provisions of the carbon/energy tax. if these evaluations reveal 
costs which are disproportionately high In relation to the 
economic situation of a Member State, it would be possible, if the 
Member State concerned requests it, to arrange financial support 
through various funds or Community financial instruments, in 
particular, the structural funds or the Cohesion Fund. In 
addition, under exceptional conditions, the Council would be able 
to decide unanimously to suspend the tax temporarily. 
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THF COMMUNITY FACED WITH ITS PRINCIPAL COMPETITORS 
26. The measures proposed by the Commission, since they will not only 
be beneficial in reaching stabilisation but also through other 
benefits for the economy, will be able to improve the performance 
of the Community In terms of sustainable development. In 
particular, increasing energy efficiency Is In the Interest of the 
Community's Industry. However, in view of the need to fight the 
phenomenon of global warming, the Community action has also to be 
seen as forming part of an international effort to which all 
countries, In particular the Industrialised countries, have to 
contribute in an equitable way. All the Industrialised countries 
seem henceforth ready to stabilise, between now and the year 
2000, their C02 emissions at a 1990 level. Regarding the means 
to be implemented to achieve this objective, most countries 
of EFTA already apply or plan to apply fiscal measures. The 
Community will continue making every effort to ensure that the 
other industrial partners follow a similar path. 
27. In this respect, it must be stressed that the Community does not 
wish to make efforts which would be In vain owing to an absence 
of international cooperation on the part of Its principal 
industrial competitors. This is particularly the case when the 
competitive position of its Industries with high energy 
consumption would deteriorate compared with Its trading partners 
who contribute more than the Community to the greenhouse effect 
but do not make comparable efforts. The Commission proposals 
therefore comprise mechanisms which make it possible to prevent 
relocation of industrial activity. Indeed, a possible relocation 
In addition to the harm it would cause the economy of the 
Community, would by no means benefit the overall reduction of 
greenhouse gas emissions. 
28. The fiscal proposal therefore foresees that the entry into force 
of the tax will depend at this stage on other OECD member 
countries putting in place a tax similar to the one envisaged by 
the Community, or measures of an equivalent financial effect. As 
to the more immediate competition problems which could follow from 
production conditions in countries other than those of the OECD, 
the draft directive foresees the possibility of modifications and 
exemptions, as mentioned In paragraph 10. 
THE COMMUNITY AND THE ECONOMIES IN DEVELOPMENT AND IN TRANSITION 
29. Although their C02 emissions have been limited until now, a 
rapid Increase In the developing countries' share of global 
emissions during the years ahead Is expected. It Is essential 
that, by definite and effective action to reduce their own 
emissions, the Industrialised countries give the lead to 
developing countries, if they wish them to become an integral part 
of the establishment of a global strategy. The Industrialised 
countries should also contribute economically to the stabilisation 
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efforts of smaller countries, especially as the reduction of 
C02 emissions In these countries often proves effective and not 
very expensive. 
30. The Community should in particular encourage, by Its financial 
contributions, the Central and Eastern European countries and the 
CIS, which contributes an important part of global C02 
emissions, to take suitable measures. These countries, owing to 
their recent experience, are moreover in general very sensitive 
to the environmental problems and are aware that the taking into 
account of environmental constraints proves essential to ensure 
that the restructuring of their economy leads to sustainable 
development. New possibilities could begin, in this respect, in 
the context of the European Energy Charter, In particular with 
regard to the more rational use of less polluting energy 
resources. 
CONCLUSION 
31. In conclusion, the Commission asks the Council to adopt the 
package of the following measures: 
- a proposal for a framework directive on energy efficiency 
(SAVE); 
a proposal for a decision concerning the specific actions 
for greater penetration of renewable energy resources 
(ALTENER); 
a proposal for a directive on a combined carbon/energy tax; 
a proposal for a decision concerning a mechanism for 
monitoring of Community C02 emissions and other greenhouse 
gases. 
The Commission, moreover, reminds the Council that the draft 
Council directive on excise duties on motor fuels from 
agricultural sources*1) which has already been submitted to the 
Council, could also contribute to a reduction of the greenhouse 
gas emissions 
(1) COM (92) 36 of 28.3.1992 

ISSN 0254-1475 
COM(92) 246 final 
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ISBN 92-77-44827-X 
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