Opinion of the European Economic and Social Committee on the Green Paper on market-based instruments for environment and related policy purposes COM(2007) 140 final — SEC(2007) 388
Date: 2007-12-13
Institutions: European Economic and Social Committee
Subjects: EU environmental policy, economic instrument for the environment, environmental protection, environmental tax, pollution control measures, waste management

16.5.2008

EN

Official Journal of the European Union

C 120/15

Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the
European Parliament and of the Council relating to the driver-perceived noise level of wheeled
agricultural or forestry tractors’ (Codified version)

COM(2007) 588 final — 2007/0205 (COD)

(2008/C 120/03)

On 24 October 2007, the Council decided to consult the European Economic and Social Committee, under
Article 95 of the Treaty establishing the European Community, on the

Proposal for a Directive of the European Parliament and of the Council relating to the driver-perceived noise level of
wheeled agricultural or forestry tractors (codified version).

Since the Committee unreservedly endorses the proposal and feels that it requires no comment on its part,
it decided, at its 440th plenary session of 12 and 13 December 2007 (meeting of 12 December), by
135 votes with 2 abstentions, to issue an opinion endorsing the proposed text.

Brussels, 12 December 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

Opinion of the European Economic and Social Committee on the ‘Green Paper on market-based
instruments for environment and related policy purposes’

COM(2007) 140 final — SEC(2007) 388

(2008/C 120/04)

On 28 March 2007, the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the

Green Paper on market-based instruments for environment and related policy purposes.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing
the Committee's work on the subject, adopted its opinion on 31 October 2007. The rapporteur was
Mr Ribbe.

At its 440th plenary session held on 12-13 December 2007 (meeting of 13 December), the European
Economic and Social Committee adopted the following opinion by 48 votes with 1 abstention.

1. Summary

is no longer about whether they should be introduced but about
how they should be used.

The Committee notes the much delayed publication of
1.1
the Green Paper on market-based instruments (MBI) for environ-
mental protection.

The Committee shares

the views expressed on the
1.2
various fiscal and environmental
impacts of various market-
based instruments for environmental protection (taxes, charges,
fees, subsidies, rights/certification schemes etc.).

1.3
The Committee notes that market-based instruments
have long been an element of political action, so the discussion

As the Commission rightly points out, MBI are a good
1.4
way of tackling environmental
issues in a cost-effective way.
They are not, however, a panacea. The political discussion —
and the Green Paper — should therefore address the relationship
and interplay between, for instance, rules and bans, regulatory
law and market-based instruments (such as taxes, charges,
targeted subsidises and tradable permits). The Committee
regrets, however, that the Commission Green Paper gives far too
few pointers in this regard.

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1.5
The Committee would therefore ask the Commission to
use the public debate triggered by the Green Paper as an oppor-
tunity to set out the scope, impact and also the limits of various
for environmental protection by drawing on
instruments
specific, practical examples.

2. Gist of the Green Paper

On 28 March 2007 the Commission submitted the
2.1
Green Paper on Market-based instruments for environment and
related policy purposes (1), which had already been announced
in 2004 and which is the subject of this opinion.

2.2 With the Green Paper the Commission intends to launch
a discussion on advancing the use of market-based instruments
(MBI) in society.

In the Green Paper

the Commission refers

2.3
to the
environmental policy objectives agreed at European level, in par-
ticular the new energy and climate policy, which, the Commis-
sion feels, ‘implies nothing less than a new industrial revolution over
the next 10 to 15 years’.

2.4
The Commission makes it clear that without public inter-
vention these ambitious objectives cannot be achieved. The
Commission considers that MBI should be increasingly used for
environmental purposes. They should be ‘important parts of the
efforts to achieve real change through changing incentives for businesses
and consumers’.

However, the Commission also states that they ‘are not a

2.5
panacea for all problems’.

2.6 MBI are defined as taxes, charges, targeted subsidies and
tradable permit systems.

Market-based instruments as policy tools

in their

The rationale for using MBI

lies, according to the
2.7
Commission,
in a
cost-effective way. Market failure refers to a situation in which markets
are either entirely lacking (e.g. environmental assets having the nature
of public goods) or do not sufficiently account for the “true” or social
cost of economic activity’.

to correct market-failures

‘ability

2.8

The following advantages are listed:

— MBI acknowledge that firms differ from each other

— They improve price signals, by giving a value to the external

costs and benefits of economic activities

— They allow industry greater flexibility in meeting objectives

and thus lower overall compliance costs

(1) COM(2007) 140 final, 28.3.2007.

— They give firms an incentive, in the longer term, to pursue
technological innovation to further reduce adverse impacts
on the environment (‘dynamic efficiency’)

— They support employment when used in the context of

environmental tax or fiscal reform.

2.9
However, the Commission also makes it clear that MBI
are used not only to achieve environmental policy goals, but
above all ‘to avoid distortions within the internal market caused by
differing approaches in individual Member States, to ensure that a
similar burden falls on the same sector across the EU and to overcome
potential adverse competitiveness effects within the EU’.

2.10
It also points out that the various MBI differ in their
effect. Quantitative systems (such as tradable permit schemes)
provide more certainty as regards reaching specific policy objec-
tives (e.g. emission limits) than purely price-based instruments
(such as taxes). Price-based instruments, in turn, provide security
regarding the cost or the price of a policy objective and tend to
be easier to administer.

2.11
The Commission also points to another major differ-
ence: Taxes (and charges) have not only been used to influence
behaviour — they also generate revenue. This is only the case
with tradable permit systems ‘if the allowances are auctioned by
public authorities’.

reasons

for environmental

The Green Paper looks at the subject of growth and
2.12
employment and sets out
tax
reforms. At its Summit in June 2006 the European Council, in
the context of
the new sustainability strategy, discussed the
possibility of a new tax system based on sustainability criteria,
without however going into details. Now the Commission
writes:
‘An environmental tax reform (ETR) shifting the tax burden
from welfare-negative taxes, (e.g. on labour), to welfare-positive taxes,
(e.g. on environmentally damaging activities, such as resource use or
pollution) can be a win-win option to address both environmental and
employment issues (2). At the same time, a long term tax shift will
require relatively stable revenues from the environment related tax base’.

Finally, the document quotes a few examples of estab-
2.13
lished MBI (energy taxes, Eurovignette, local charging systems to
reduce urban congestion) and formulates a large number of
questions, ranging from the very general to the specific, directed
at the public with a view to launching a debate in society.

2.14
biodiversity.

The Commission also sees ways of using MBI to protect

(2) The Commission raised this issue already in 1993 in its White Paper on
Growth, Competitiveness and Employment — COM(93) 700,
Chapter 10 — and again more recently in its recent communication on
the European social model or in a paper on the links between employ-
ment policies and environment policies. Cf. COM(2005) 525 and
SEC(2005) 1530. Ex post evidence from the Nordic countries as well as
the results of model-based studies indicate the existence of both types
of benefits.

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3. General comments

specific examples as possible, if the EU's ambitious climate and
energy policy objectives are to become a reality.

3.1
The EESC has often advocated the optimum use of a
broad range of policy instruments for environmental protection,
with MBI having an important role to play. Here the Committee
and the Commission are in agreement.

3.9
The EESC considers that MBI should be guided by the
polluter pays principle and could thus offer incentives to all
those who actively protect the environment.

3.2
The Committee, while endorsing the — in its view —
sound and accurate points made, would have liked to see the
Green Paper, which was a long time in preparation and the
publication of which was repeatedly delayed, bring rather more
clarity to the planned future use of MBI. In terms of the overall
policy-shaping process, however,
the protracted and quite
possibly necessary consultation exercise within the Commission
has, as far as the Committee can see, so far been to no discern-
ible avail.

The impression, if anything, is that internal consultations

3.3
are to some extent being outpaced by political realities.

3.4
The Committee notes that environmental MBI have long
been a reality, albeit used in widely differing ways in the indivi-
dual Member States. According to Eurostat, for instance,
just
under 7 % of total revenue collected in the EU Member States
comes from environmental taxes.

3.5
The Green Paper and the attendant political debate can
therefore no longer be about the possibility of introducing envir-
onmental MBI. The question is not whether, but how. In other
words: to what extent are market-based instruments to be used
and how are these to correlate with rules, bans and other policy
tools?

3.6
However, the content of the Green Paper does not go
any further than what has long since been known, and been the
subject of discussion, in the business community and in society.
Nor does it address the question of who is to be the prime
mover. The EU does not of course have equal responsibility for
all possible instruments. In taxation matters, for example, it has
only very limited powers. Moreover, at a policy level, it is not
clear just what is supposed to happen in the wake of the publi-
cation of the Green Paper, whether, as is usual, a white paper is
to follow or what conclusions are to be drawn from the exer-
cise.

3.7
Its biggest shortcoming is the lack of any clear indication
of which policy instrument should be given priority in a given
political situation. The intended demarcation or possible linkage
between regulatory law and MBI remains unclear.

Consequently, while noting the Green Paper with
3.8
approval, the EESC points out that the social debate on more
effective
to be
conducted with greater commitment and must draw on as

environmental policy

instruments needs

4. The EESC's specific comments

4.1
The EESC has always stressed the importance of interna-
lising ‘external costs’. And here, as the Commission itself points
out, MBI can play a part. But first a clear political decision is
needed on the amount of the external costs to be internalised.

The

instrument,

‘market-based’

road-transport

4.2
the
Eurovignette, described in the Green Paper, is a good illustration
the problem, as this instrument, which is regarded as a
of
suitable tool for integrating external costs, has in reality been
used only very half-heartedly. The Commission itself writes that
‘average charges can only cover infrastructure costs and thus exclude
external costs’. Initiatives are therefore needed which would, for
example, integrate external costs using the Eurovignette.

fully meet

The Committee would ask the Commission, the Council
4.3
and the Parliament to class an MBI as environmental only if it
has a genuine and clearly discernible environmental objective.
The Eurovignette, which is mentioned in the Green Paper, does
not
that criterion, as the external costs are not
included. The Eurovignette is primarily designed to ensure that
infrastructure costs are not met solely by the public purse but
that users are also directly involved. Of course, that also has an
indirect impact on the environment in cases where, for instance,
users facing higher costs start to question their car use and
wonder whether a better option would be to make the journey
by train (or indeed not to make the journey at all). However,
until steps are taken to factor in the (environmental) costs that
have so far had ‘no market’ and have been left out of the equa-
tion, the Eurovignette should not be regarded an instrument of
environment policy.

4.4
In the first instance, therefore, it is up to policymakers to
to
make clear what a particular policy measure is meant
achieve. Only once the objective is defined should the discussion
turn to the policy tool that is suited to achieving it.

4.5
Hence, the increased use of MBI will not enable policy-
makers to avoid what is in some cases the very difficult, contro-
versial decision to lay down clear (environmental) objectives
such as emission limits. This is what has often been lacking in
the past. MBI are no substitute for such decisions but rather, as
their name suggests, instruments for achieving defined political
objectives.

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4.6
The Commission must act without delay to remove the
uncertainties thrown up by the Green Paper. It must clearly state
just how it sees the various policy instruments being used in
future. The EESC thus recommends that the Commission, in the
context of the planned wide-ranging discussion on the subject,
illustrate the possible policy options (with or without MBI) by
means of a few practical examples drawn from different policy
areas, e.g. energy and transport.

The Commission could,

4.7
for instance, make clear that
there is no intention of introducing MBI to resolve, say, the
problem of carcinogenic substances.

4.8 MBI could, however, be useful in dealing, for instance,
with the increasingly topical issue of CO2-free coal-fired power
plants and the prospects for building such plants, should the
requisite technology become available in the near future. Is it
the intention to make it mandatory (i.e. via legislation) to use
‘state-of-the-art’ technology for these plants or are MBI to be
used to make them profitable? Questions such as these should
in future be debated more in society.

4.9
If the demarcation/linkage of regulatory law and MBI
were made clearer by setting out specific options for action, this
might also make the Green Paper's discussion of the use of MBI
for the maintenance of biodiversity more comprehensible. In
this area the EESC does not consider that the Commission has

Brussels, 13 December 2007.

yet come up with any convincing ideas that might offer some
hope of effectively combating the worrying decline in biodiver-
sity.

4.10
In its opinion on the Biannual Progress Report of the
EU Sustainable Development Strategy (3) the Committee called
on the Commission to flesh out its very vaguely worded propo-
sals for a new tax system based on sustainability indicators.
taxes
According to Eurostat,
amounts to some 7 % of the total.

revenue from environmental

4.11
The EESC considers a debate on reducing the taxation
of labour and compensating for this with revenues from the
taxation of environmentally harmful activities to be overdue.
This should be accelerated following submission of the Green
Paper. However, it also needs to be made clear in this context
how the EU envisages changes of this kind taking place, given
that, under the Treaties, it has only a marginal influence on the
tax policies of the Member States.

The EESC considers it extremely important that the
4.12
promised survey of environmentally harmful
subsidies be
submitted without delay and that these subsidies be abolished as
soon as possible. The Committee sees environmentally harmful
subsidies as a significant distortion of competition and a
completely unacceptable misallocation of public funds. MBI will
only be effective as instruments to promote environmental
protection once environmentally harmful subsidies have been
completely eliminated.

The president

of the European Economic and Social Committee

Dimitris DIMITRIADIS

(3) OJ C 256, 27.10.2007, p. 76.