Commission to relaunch talks on EU carbon tax

The European Commission will start discussions next Wednesday (23 June) on imposing a minimum tax on carbon across the entire European Union.

The tax is a priority for Algirdas Šemeta, the European commissioner for taxation. But it could become one of the major political battles of José Manuel Barroso's second mandate as Commission president.

The UK and Ireland have both firmly rejected such a tax as an assault on their national sovereignty.

The Commission is pressing ahead with work on the tax proposal even though national governments would have to approve it unanimously for it to become EU law.

Šemeta has received strong support from Connie Hedegaard, the European commissioner for climate action, and Janez Potoc?nik, the European commissioner for environment.

They believe that the UK and Ireland can be won over by a combination of concessions and pressure from other member states.

Sweden, Denmark and Finland already apply carbon taxes at national level. They are strongly supportive of Šemeta's approach, because it would protect their businesses against competitive disadvantage. France has also given strong support to the idea in principle.

Ireland too applies a national carbon tax, “but it remains of the firm view that taxation is a matter for national governments”, a diplomat told European Voice. The tax was introduced in last year's budget as part of a deal to win support from the Greens for the national coalition government.

The EU tax envisaged would cover energy for heating and motor fuel, and would apply to households and to sectors of the economy not covered by the EU's emissions trading scheme.

The tax is supported by environmental groups, which see it as an essential element in the EU's efforts to meet its climate-change goals.

But the potential impact on industry has raised concerns both within the Commission and in national capitals. Conscious that these fears could scupper his plans, Šemeta will use this first discussion among commissioners to explore protective measures for sensitive industries.

France has already demanded an exemption for agriculture, arguing that farming protects the natural environment, and because it is not a major polluter. Dacian Ciolos, the European commissioner for agriculture and rural development, is likely to raise similar concerns at the meeting.

Šemeta is reluctant to grant a blanket exemption to agriculture, as it would remove a large sector of the economy from the tax and provoke allegations of unfairness from industries that have to pay. He will be ready to examine compromise measures such as reduced tax rates, or allowing member states to use tax credits to reduce the overall burden on the sector.

But advocates for other sectors are also lining up for battle. Janusz Lewandowski, the European commissioner for financial programming and budget, is expected to raise concerns that the plan could jeopardise the competitiveness of the coal industry in his native Poland.

Car manufacturers are concerned that Šemeta's plan would drive up the minimum tax rate charged on diesel – something EU officials concede will be likely. Šemeta is expected to respond with measures that will ease the negative consequences of an increased rate. Options under consideration include a gradual adjustment process, and a reduced rate for diesel that is used commercially.