Carbon tax ? a cure for EU budgets and environment

AEBIOM supports the EC efforts to introduce a CO2 tax by revising current Energy Taxation Directive and urges the EU member states to seriously consider the proposal of the Commission. The CO2 tax, if introduced, will not only reduce CO2 emissions and improve energy efficiency but will also significantly increase the member states budgets.

In times when many European countries are looking for ways to strengthen their state budgets and build confidence in the financial markets, a tax on carbon dioxide becomes an ideal measure. ?The EU member states, however, do not need to wait for a new energy taxation directive to introduce this kind of environmental taxation. They can and should act straight away?, says Gustav Melin, the President of AEBIOM.

EU-27 emitted more than 4 600 million tons of CO2 in 2009. Roughly half of EU emissions are already covered by Emissions Trading Scheme (ETS - for plants higher than 20 MW). The EC proposal to revise Energy Taxation Directive and to introduce a carbon tax of 20 Euros/ton CO2 at EU level would cover all the applications below 20 MW. The Commission assesses the impact of the proposal of Energy Taxation Directive to reach 92 million tons, or more than one third of the effort needed outside the Emission Trading System to reduce the GHG emissions by 2020.

AEBIOM Secretary General Jean-Marc Jossart points out that most importantly, the modelling simulations showed that such emission reductions can be achieved either with very limited costs or even with small economic benefits.
A carbon dioxide tax has many additional advantages:

 It promotes energy efficiency and energy savings;
 It reduces the dependence on imported fossil fuels and stimulates the investments and the use of domestic renewable energy sources;
 It ensures ?polluter pays principle? and has a direct impact on price and thus on consumer behaviour. It helps the consumers to make the right choices in future investments. In such a way, environmental costs (external costs) are internalised and made a part of the total cost of the polluting activities.

??All of this will create thousands of new jobs and new businesses in struggling economies??, adds Gustav Melin, the President of AEBIOM.

Many households are unfortunately dependant on fossil fuels for heating. It is certain that due to the scarcity of fossil fuels reserves and consequently rising prices, the energy poverty will increase in the future. In order to avoid it, the transition to a more sustainable energy system should be carried out as early as possible. Some of the income from a carbon tax can be used to alleviate energy poverty. For example, Sweden has lowered its? income tax by 7 billion EUR during the years 2007-2010.

The tax increases the cost for those consumers and companies that use fossil energy in large amounts or in an inefficient way. But it also makes it more profitable to invest in measures that reduce energy related costs such as insulating homes, installing better windows or switching heating systems or district heating from coal, oil and gas to biomass.

For Europe as a whole, a carbon tax is a necessary measure to reduce greenhouse gas emissions in a market oriented way. It puts a price on carbon in all sectors of society outside the emission trading scheme, thereby, creating a level playing field between different business sectors. A carbon dioxide tax is already successfully introduced in countries like Sweden, Finland, Denmark, Slovenia and Ireland. Other EU Member States should, therefore, seek to introduce such a tax instead of opposing it.
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Posted by Gloria Llopis | 2011-11-30