The environmental transition will either be fair or it won’t. This was the message that the European Commission and several stakeholders delivered on Tuesday 20 April at an online conference on ‘green’ taxation.
All agreed that environmental taxation can play a positive and active role in achieving the objectives of the Green Deal by encouraging a shift to cleaner energy, more sustainable industry, and greener habits.
‘Green’ taxation is widely seen as also contributing to post-Covid-19 economic recovery and long-term sustainable growth. “Reviewing our taxation policies at national, European and global levels can help us emerge from this crisis even stronger than before”, said EU Taxation Commissioner Paolo Gentiloni.
But acceptability will be crucial, he stressed, and remedial measures will be needed for the most affected households. In his view, to be accepted, such taxes must be part of a broader set of policies that ensure a just transition.
An observation shared by Zakia Khattabi, the Belgian Minister for Climate and the Environment, who believes that compensatory measures must be adopted and other taxes reduced in parallel.
In order to make progress on this issue at European level, she also called for decision-making by qualified majority rather than unanimity in the EU Council.
Portuguese Finance Minister João Leão assured that ‘green’ taxation was high on the agenda of the Ecofin Council. “Countries should not claim sovereignty on climate”, he said.
This is also a priority for the Italian G20 presidency, which will hold a symposium on taxation and the environment on 9 July, according to Italian Finance Minister Daniele Franco.
For Laurence Boone, the OECD’s chief economist, it is not a good idea to implement these taxes now, in the middle of the pandemic, but there is nothing to stop us from starting to design them now.
Review of energy taxation
In June, the European Commission will present a long-awaited revision of the Energy Taxation Directive, which has remained unchanged since 2003 (see EUROPE 12534/27).
The Commission wants to revise the minimum tax rates applicable to energy products and electricity, which have not been updated since the Directive’s entry into force. It also intends to rethink current tax exemptions in order to reduce implicit subsidies to fossil fuels and certain economic sectors.
The Commission will broaden the tax base and work towards greater transparency to detect “hidden subsidies”, explained Gerassimos Thomas, Director General of the European Commission’s DG Taxation (TAXUD).
Fairness is not only for citizens, but also for companies, he said, calling for incentives to invest in more sustainable production. (Original version in French by Marion Fontana)