EU carbon tax plan to include transport sector

EU TAX commissioner Laszlo Kovacs has proposed a pan-European carbon tax on emissions that do not come within the ambit of the current emissions trading scheme.

At a meeting here of EU finance ministers and central bank chiefs, Mr Kovacs indicated that households would come within the framework of the plan, as well as the transport, agriculture and forestry sectors.

The framework would operate in the same way as European rules on value added tax, in which the EU lays down a minimum tax rate that can be imposed in each case.

Mr Lazlo emphasised at a press briefing that such a scheme would be subject to a unanimous decision by EU governments.

He said the commission will propose the tax early next year, by which time a new commissioner will be in charge of the taxation directorate general.

However, he believed political agreement on the parameters of the plan could be reached in the first half of next year.

The commission’s push for a deal on carbon taxes will come after the Government’s likely introduction of such taxes in next year’s Budget.

“Introducing a new tax in the EU has never been easy, and particularly it’s not easy in the time of a financial and economic crisis,” Mr Kovacs said. “But it is evident that the climate change is an even more disastrous global challenge than the current financial and economic crisis. It’s a question of life or death for the population of the globe.”

At the same event, the Swedish presidency of the EU stepped up pressure on the US to do more to secure a global deal on fighting climate change at the Copenhagen summit in December.

Sweden’s finance minister Anders Borg, host of the informal eurogroup and Ecofin meetings, said the Obama administration should do more to convince developing countries to participate in a climate agreement to replace the Kyoto pact after 2012.

“We need US support. We need stronger US action on climate change,” Mr Borg said. Washington was making “good sounds” on climate, he said, but action was required.

Developing countries are demanding significant aid assistance in exchange for committing to lower carbon dioxide emissions. They argue that the developed world should bear the brunt of the cost of a settlement as the depletion of the ozone layer is largely their responsibility.

The EU is discussing aid figures, ranging from €2 billion to €15 billion a year until 2020, depending on how ambitious the deal will be. However, the US has not yet named its possible contribution.