EC Pushes to Adopt Model 'Sin Tax' on Energy Users

THE European Community plans to take the lead on global warming later this month, when it expects to levy an energy tax designed to cut carbon dioxide emissions.The EC's executive Commission is straddling pressure on both sides of the issue. Wealthier, more environmentally conscious member countries in northern Europe are urging action, while other countries are worried that the tax will mean higher costs and lost competitiveness. But the Commission says the new tax should push industries and consumers to use energy more efficiently while imposing no new net tax burden on them. The new energy tax, the Commission says, will be offset by tax cuts elsewhere. And the EC wants other industrial powers to take similar action. "With this initiative the Commission is looking to give the Community the role of catalyst at the international level," said Carlo Ripa di Meana, the EC's environment commissioner, in a recent presentation of the tax proposal. Environment ministers from all 12 EC countries expressed support for the tax at an Oct. 12 meeting. The tax proposal still requires the approval of EC finance ministers. The Community hopes bringing such a tax to the United Nations environment and development conference in Rio de Janiero next June will pressure others, such as the United States, to take the same road. EC officials note that while the Community generates 13 percent of world carbon dioxide emissions, the US produces 23 percent and the Soviet Union and Eastern Europe 25 percent. Japan generates 5 percent. US President Bush has been reluctant to take action to limit the greenhouse effect, whereby man-made atmospheric emissions like carbon dioxide trap the sun's energy and heat up the Earth's atmosphere. Citing US scientists who doubt this effect of carbon dioxide, US officials reject action that would have substantial economic repercussions. In an effort to stabilize EC carbon dioxide emissions at 1990 levels by 2000, the Commission proposes a $10-per-barrel-of-oil tax by the turn of the century. The plan would implement a $3-a-barrel levy in 1993, increasing $1 a year until 2000. The tax, to be administered nationally, would generate $65 billion annually once fully implemented. EC officials say it would be an important step toward rebalancing taxation in favor of the environment. The plan would hit the Community's wealthier countries hardest and would be weighted to have the heaviest impact on the dirtiest sources of energy. Thus coal energy would be taxed higher than oil, while nuclear power would fare better than either. In addition, energy-intensive industries, such as steel, chemicals, cement, glass, and paper, would receive special dispensations, "until the Community's main competitors, such as the US and Japan, took similar measures," says an EC spokesman. Despite the intention to protect European industries, industrial organizations have expressed early opposition to the plan. "I can't say they gave it a positive welcome," says the spokesman. Any unilateral action by the EC "would cause severe economic damage without any certainty of achieving the desired environmental objective," said a joint statement by the European Federation of Industrial Energy Consumers, European Chemical Industry Council, European Automobile Manufacturers, European Association of Metals, and others. The industries recommend instead that the EC "focus on the reduction of greenhouse gases in central and eastern Europe" and "press for concerted international action cover ing all countries." Still, with EC countries like Germany, Denmark, and the Netherlands already considering an environmental "rebalancing" of their national taxes, the Community is likely to take some action. Tax harmonization is already one of the more difficult goals of the Community's single market, and EC officials say they want to discourage further disparate tax action among members. An EC energy tax would signal the beginning of a common environmental policy, which EC officials want to encourage.