Opinion of the Economic and Social Committee on the 'Proposal for a Council Directive on restructuring the Community framework for the taxation of energy products'
Date: 1997-10-29
Institutions: European Economic and Social Committee
Subjects: energy-generating product, environmental protection, excise duty, fiscal policy, tax harmonisation

21. 1. 98

EN

Official Journal of the European Communities

C 19/91

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Directive on
restructuring the Community framework for the taxation of energy products’ (1)

(98/C 19/25)

On 8 April 1997 the Council decided to consult the Economic and Social Committee, under
Article 99 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for Economic, Financial and Monetary Questions, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 14 October 1997. The
rapporteur was Mr Schmitz.

At its 349th plenary session (meeting of 29 October 1997) the Economic and Social Committee
adopted the following opinion by 83 votes to 23, with 13 abstentions.

1.

Introduction

2. General comments on the proposal

1.1.
The ESC has spoken out in various opinions in
favour of economic regulatory instruments in the field
of environmental policy. The Commission’s proposals
for a CO2/energy tax were basically welcomed by the
ESC, despite some criticism on details (2).

1.2.
The ESC strongly agrees with the idea that
eco-taxes must not be allowed to lead to a higher overall
tax burden. To ensure tax neutrality, taxation of the
labour factor must be reduced proportionally. Optional
rules are not sufficient here. Rules are needed binding
the Member States, which have responsibility for tax
law.

1.3.
The ESC has pointed out in various opinions
that the introduction of eco-taxes must not be allowed
to lead to European firms becoming less competitive
and to jobs being lost, especially in energy-intensive
sectors. But steps should be taken to ensure that
low-income groups do not face greater hardship.

1.4.
In its role as Single Market Observatory, the ESC
has also asked the Commission and Council to reduce
distortions in the single market caused by national tax
policies. Energy taxes, especially those on mineral oils,
vary widely between Member States. In the fuels sector
this leads to unjustifiable distortions of competition,
especially in frontier regions.

2.1.
After the deadlock within the Council on the
proposals for a CO2/energy tax, the Commission is
— not least at the Council’s urging — now trying a new
approach by means of a proposal for minimum taxes
on energy products.

2.1.1.
number of criticisms to make.

The ESC supports this initiative but has a

2.1.2.
As soon as the Amsterdam Treaty is ratified it
will be possible, if unanimity cannot be reached in the
Council, for the implementation of the Commission
proposal to be decided by a group of countries at least,
through the introduction of the ‘enhanced cooperation’
instrument (3). The ESC does not, however, consider
such a development to be desirable, as it could lead to
further distortions of competition in the internal market.

2.2.
Compared with its earlier proposals for a
CO2/energy tax, the Commission is now setting its
sights much lower. This generally pragmatic proposal
will, however, have an extremely limited impact as an
environmental regulatory instrument. Other instru-
ments, for example voluntary measures listed by the
Commission in its communication ‘An overall view of
energy policy and actions’ (4), are in some cases more
efficient.

2.2.1.
The Commission is linking its new proposal to
the existing directives on minimum tax levels for mineral
oils (92/81/EEC and 92/82/EEC). Like them, other fuels
and electricity would be subject to a minimum tax level.

The earlier proposal for a CO2/energy tax
2.2.2.
sought above all to tax CO2 content and primary energy

(1) OJ C 139, 6. 5. 1997, p. 14.
(2) ESC Opinion of 28. 3. 1996 on the Amended Proposal for
a Council Directive introducing a tax on carbon dioxide
emissions and energy. See point 2.4; OJ C 174, 17. 6. 1996,
p. 47.

(3) ESC Opinion of 28. 3. 1996 on the Amended Proposal for
a Council Directive introducing a tax on carbon dioxide
emissions and energy. See point 3.1.4; OJ C 174, 17. 6. 1996.

(4) COM(97) 367 final, 23. 4. 1997.

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(there were special rules for electricity). Now, only the
final form of energy is to be taxed. The environmental
regulatory impact is therefore less pronounced, as the
energy conversion process can no longer be influenced,
and there is still no account taken of the specific CO2
component.

2.2.3. With its proposal, the Commission wants to
set minimum rates of excise duty on energy products.
The business sector is to be largely unaffected by the
taxation. Thus, all energy products that are not used as
motor or heating fuels are untaxed. Neither are energy
products that are basically used as raw materials, such
as energy products and electricity that are basically
used for chemical reduction or in metallurgical and
electrolytic processes. The ESC regrets that the Com-
mission’s proposal does not seek to provide tax relief
for forms of energy other than electricity that are used
in industrial production. In the fuels sector, there are
special rules for certain industrial and commercial uses;
firms with particularly high energy costs will be given
some tax relief.

As the Commission proposal concerns the
2.2.4.
excise duties on energy products, the environmental
regulatory impact is largely limited to consumer behav-
iour. It is intended to encourage people to buy products
(vehicles,
tools, etc.) which require less energy.
Indirectly, manufacturers will be induced to market
products requiring less energy. A further environmental
effect will be felt in the heating of buildings.

The proposed tax rates, especially those for fuels,

2.3.
appear very low.

2.4.
The Commission is proposing moderate tax
increases up to 1 January 2000. Target rates are put
forward for 1 January 2002. The proposed increases in
the fuels sector are far too cautious. This is incomprehen-
sible, given the big increases in CO2 emissions from
traffic. The ESC would also refer here to Article 16 in
the Commission proposal, which empowers Member
States to levy taxes on motor fuels below the minimum
rate if specific charging systems for road transport are
introduced.

petrol coupons) for Objective 1 — and Objective 6 —
regions, over and above the existing arrangements for
certain remote islands.

2.5.
Insofar as the Member States have been given
room for technical manoeuvre in formulating national
energy taxes, this should not be allowed to lead to any
distortions of competition in the single market.

2.5.1. However, the ESC wonders whether, as regards
special eco-regulations (such as tax exemption for
renewable forms of energy), more binding provisions
should not be introduced with an eye to avoiding
distortions of competition.

2.5.2.
The ESC regrets that no clear indications have
been given about tax neutrality. Experience unfortu-
nately shows that newly introduced energy taxes are not
balanced by corresponding reductions elsewhere in the
tax system. The ESC therefore urges the European
Council, in parallel with the decision on the directive in
the Council, to give a commitment to use any increase
in tax revenues to reduce the burden of taxation
on employment. Since private households will be hit
especially hard by any increase in minimum tax rates,
compensatory social measures should be taken to help
low-income groups in particular.

2.6.
The ESC has the impression that the proposal
has been prompted less by environmental objectives
than by the desire to make the single market operate
more efficiently by reducing distortions of competition
caused by taxation. This specific objective is welcomed
wholeheartedly, especially as tax policy issues in the
single market are becoming of ever-increasing import-
ance with economic and monetary union pending. The
ESC feels that distortions of competition are particularly
marked in the fuels sector. For the rest, the ESC does
not expect this proposal to endanger the planned
liberalisation of EU energy markets.

2.7.
A big advantage in this proposal compared with
the proposed CO2/energy tax lies at the technical level.
The Commission’s proposal to tax the final form of
energy will involve much less red tape than a tax on
primary energy.

for LPG (liquefied
2.4.1. When the tax rates
petroleum gas) and natural gas (methane) as a fuel are
fixed, its relative environmental friendliness should be
taken into account. The proposed rates of increase
should be less than those for petrol and diesel.

3. Specific comments

3.1. Article 9

2.4.2.
The higher taxes on motor fuels could have
unacceptable economic disadvantages for some regions
of the Union. The Member States should be given the
right to take site-linked compensatory measures (e.g.

The wording in Article 9 contradicts
in
Article 13(1)(b). According to Article 9, the heat gener-
ated during electricity production will be subject to a

that

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minimum tax. But under Article 13(1)(b) the Member
States are not obliged to introduce such a tax.

3.6. Article 15(1)

3.2. Article 13(1)(b) [also applies to Article 14(1)(e)]

The ESC proposes that district or remote heating should
be tax-free.

3.3.
The ESC suggests that, in addition to electricity,
tax relief should be provided for other forms of energy
used in industrial production (chemical reduction or
metallurgical and electrolytic processes).

3.4. Article 13(1)(c)

Fuels for the purpose of air navigation are to be exempted
from taxation in the proposed directive. Because of the
negative environmental effects (CO2/emissions), the EU
should commit itself, at the same time as the directive is
adopted, to reaching international agreement on the
taxation of kerosene.

3.5. Article 14(1)(c)

The Member States should be obliged to exempt certain
renewable energy sources (e.g. solar energy)
from
taxation.

Brussels, 29 October 1997.

The ESC feels that the planned refund should not just
be granted to firms. Corresponding refunds should also
be granted to private individuals (such as house owners),
especially as regards heating.

3.7. Article 15(2), second sub-paragraph

If energy used in industrial production is made tax-free,
the rule provided for here is unnecessary. The ESC
would also point out that the Commission proposal
does not state clearly how energy costs are to be
calculated.

3.8. Article 18(3)

Add:

‘Firms achieving the CO2 reduction objectives set in
the self-commitment statements will be exempted
from the scope of the directive,
insofar as the
reduction results for individual firms are detectable.’

The President

of the Economic and Social Committee

Tom JENKINS

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APPENDIX

to the opinion of the Economic and Social Committee

The following amendments were rejected but received more than 25 % of the votes cast:

Point 1.3

Insert the following after the first sentence:

‘Unless there are corresponding reductions elsewhere in the tax system, increasing the current minimum
rates for consumer levies and their general application to all industrial products will lead to a significant
rise in production costs in the industrial and transport sectors.’

Reason

The justified warning in the first sentence of a loss of European firms’ competitiveness, especially in
energy intensive sectors, should be explained and emphasised in this way.

Result of the vote

For: 38, against: 68, abstentions: 6.

Point 2.4

Redraft the third and fourth sentences to read:

‘Even if the problem of growing CO2 emissions from traffic is to be taken seriously, any further increases
in the fuels sector should only be allowed to take place after first reducing taxes elsewhere and after an
exact analysis of the impact of such a measure on growth, competitiveness and employment.’

Reason

It is a contradiction if, on the one hand, the excessive overall tax burden in Europe is deplored and, on
the other, there are calls for even higher taxes on energy products. The energy taxes issue cannot be
dealt with separately from the overall discussion on the economy in Europe (boosting competitiveness
and employment opportunities by lowering taxes).

Result of the vote

For: 40, against: 67, abstentions: 9.