Brussels, 07/05/2002 (Agence Europe) - The Ecofin Council decided, on 7 May, to create a new high level group, headed by the Presidency, to pursue discussion on energy tax, in the hope of reaching a political agreement in June and of adopting the directive on energy tax end 2002, as requested by the Barcelona Summit, Rodrigo Rato, Council President, told the press. While the Presidency and several Member States would have preferred to simply extend the mandate of the taxation or the Primarolo groups, which already exist, the ministers finally rallied to Germany and the United Kingdom which insisted a new group should be set up to accelerate the work.
During a policy debate, the Council gave a favourable welcome to the guidelines proposed by the Spanish Presidency to reach a compromise on the level of taxation on energies used for heating and fuel, and on possible exemptions: industries with a high intensity of energy use, road diesel fuel, "green" fuels, kerosene, industries having concluded an agreement on the protection of the environment, local public transport, etc. Mr Rato stressed that the Spanish proposal would not involve an overall increase in the burden of taxation. He remarked that all Member States welcomed the efforts made by Spain, which was hitherto opposed to the draft text presented in 1997 by the Commission (Ed.: fearing that it could lead to higher inflation and lower competitiveness in the industry). Without giving an opinion on the substance of the matter, Commissioner Frits Bolkestein said before the press that "it is clear the more exemptions there are, the more the text will look like gruyère cheese full of holes. The Commission's role is to ensure that it looks more like Edam cheese, with the least holes possible".
Ministers restated their desiderata for these exemptions, already expressed during the Coreper meeting last week (see EUROPE of 4 May, pp. 9 and 10). France, represented at the level of the secretary of State for the budget, called for example for no commitment to be taken on taxation of diesel fuel before the Commission has made a specific proposal, announced for the summer. The United Kingdom and Ireland call for their "historic" derogations on domestic fuel to be preserved. British Minister Gordon Brown also stressed that the priority must be to fix a date for complete liberalisation of the energy market. Belgium hoped there would be coordination between the Ecofin debates on energy tax and those of the Energy Council, on the taxation of biofuels. This subject should be part of the mandate of the new high level group. Southern countries insist there should be derogation for the industries with intensive energy use. At the request of the northern countries, the Commission should specify the definition of such high-energy intensive industries.
The Spanish proposal provides for minimum rates of taxation for fuels (EUR 421 per 1000 litres for leaded petrol, 359 for unleaded, 302 for gasoil and kerosene, 125 for liquified petroleum gas, 2.6 euros per giga joule for natural gas) and heating (21 euros per 1000 litres for diesel fuel, 15 euros for heavy fuel, 0 for kerosene and liquefied petroleum gas).
It recommends authorising States to fix a lower rate for road diesel fuel at a level of EUR 287 for 1000 litres, pending adoption of the directive harmonising excise on diesel fuel that the Commission is to present. If the directive in question has not been adopted for 31 December 2004 (date set for implementation of the energy tax), the Council will decide to amend the energy directive, on the basis of a Commission proposal.
The rates for taxing energy products other than oil already subject to a harmonised rate of excise would be: 1) Natural gas: 0.15 euros per giga joule for professional consumption and 0.30 giga joule for private consumption. Nonetheless, the States where the share of natural gas is lower than 15% of energy consumption in 2000 may grant reductions or exemptions during a maximum of 10 years, or until this share reaches 25%; 2) Coal: the minimum rate will be 0.15 euros per giga joule for professional use and 0.30 for private. A zero rate, however, would be applied for electricity production, chemical reduction, electrolysis and metallurgy processes, the lime, cement, glass and ceramics sectors; 3) Electricity: the rate would be 0.50 euros per megawatt hour for professional use and 1 euro for private use. The taxation of heat produced by combined heat/electricity generators, however, would not come under the scope of the directive. Biofuels and electricity produced from renewable energy sources could benefit from tax exemption.
In addition to these rates with derogation, the Spanish proposal provides for lengthy transition periods: 1) a 4-year transition period for "Member States experiencing particular difficulties in implementing the new minimum rates"; 2) extension of derogation on excise on oil for "geographically disadvantaged" regions; 3) the keeping for four years of the current system in Ireland; 4) a 10 year transition period for Greece for petrol and diesel used as a fuel to enable it to change its system for taxing electricity upstream to a system of taxing electricity downstream. As far as the German finance minister Hans Eichel is concerned, the ECOFIN negotiations made real progress. He told reporters that he hoped they would manage to arrive at a directive before the end of the year.