Energy Tax Directive Revision
European Environment Bureau (EEB)
Brussels, 17.05.2011
Kai Schlegelmilch
Economist
Vice President of Green Budget Europe/GBE
Structure of presentation
1) Introduction of Green Budget Germany/Europe (GBG/GBE)
2) Need for an Environmental Fiscal Reform (EFR)
3) EFR Reform Elements in Germany
4) EFR Approaches in Europe
5) EFR Approaches Globally
6) Relevance for Energy Efficiency
7) Further Information
8) Conclusions
2
1. Green Budget Germany/Europe (GBG/GBE) –
Forum Ökologisch-Soziale Marktwirtschaft (FÖS)
• Non-Profit Non-Governmental Organization
– founded in 1994, now 6 employees and 6+ interns
– >90% of funding through studies, lobbying,
conference organisations, trainings
 hence depending on 3rd party financing
• Fields of expertise
Commitment to Market-Based/-Improving Instruments in environmental policy
such as:
– Environmental Fiscal/Tax Reform: Taxes/Charges on energy and resources
– Cutting of environmentally harmful subsidies
• Main activities
– Studies (on ETR/EFR and environmentally harmful subsidies) and
Newsletters, Conferences and Trainings
– Projects for the German Environment Protection Agency (UBA), European
Climate Foundation, Greenpeace, WWF
– GBG is internationally very active…
3
1. GBE is internationally very active
Organisation of the Global Conference on Environmental Taxation in 2007
Green Budget Europe (GBE) was set up as project of GBG in 2008 =
European network for market-based/improving instruments
Next GBE-Conference at EEA/Copenhagen on 15th/16th September 2011
GBE has contributed to many international conferences. GBE has carried
out further consultations of EU-Commission, OECD, European
Environment Agency (EEA), World Bank, Governments, NGOs and other
stakeholders in countries such as Morocco, China, Thailand and Vietnam.
On behalf of GIZ, the German development aid agency (www.giz.de),
Green Budget Germany has developed a Training Manual to train trainers
on EFR in developing countries.
It is also translated into French and Spanish.
Further applications are most welcome. It can also be applied in
industrialised countries.
4
2. Need for Environmental Fiscal Reform (EFR)
• Climate Crunch
- Need to tackle climate change and environmental pollution
- Need to trigger innovations and jobs
• Energy Crunch
- Need to secure energy supply, energy efficiency and renewable energies
- Need to reduce our energy imports and bill
• Budget Crunch
- Lived beyond one‘s needs for decades
- Deepened due to the financial crunch
In a market economy the polluter pays principle has to be
applied all over: All have to pay for the full costs!
5
2. Need for Environmental Fiscal Reform (EFR)
„Perverse“ incentives dominate
– Market prices are THE signal in an economy, hence they
should work for and not against environmental protection
• Penalties for “green behavior” (trains – airplanes / electricity
generated by coal power – green electricity)
• Subsidies for non-environmentally friendly behavior
• Taxes and levies system heads to the wrong direction:
“Goods” are taxed instead of “bads”
Policy results
Inefficient use of energy, unemployment,
budget deficits/Waste of taxpayers money,
climate and environmental protection is not profitable
6
3. EFR Reform Elements – Implemented in Germany
1999-2003
• Social security contributions were reduced
• Transport/heating fuel taxes were increased
• An electricity tax was introduced between
• Impacts: -2-3% CO2-emissions, first time ever lasting reduction of fuel sales (17% incl. oil price impact), 250,000 additional jobs created
2011
–
–
–
–
–
–
Ticket fees on air transport
Charge on nuclear fuel
Heavy goods vehicle toll extended
Reduction of industrial exemptions from the energy tax
Financial transaction tax (generally adopted, started as a banking charge)
Shifting the tax base for company cars on CO2-emissions (not implemented, in
the opposite: Attempt to enlarge tax benefits according to coalition treaty)
• GBG proposed all these elements + more in a study on behalf of the
Heinrich-Böll-Foundation: Most were implemented (http://www.foes.de/pdf/201010-HBF_GreeningTheBudget.pdf):
A great success story of the combination of providing timely information
with lobbying activities.
7
4. Energy taxation on EU-level
On the one hand:
• Legal requirement for unanimity voting makes progress very difficult.
• Steps so far:
- 1993: Minimum tax rates for all oil products were introduced when the
internal market came into force
- 2004: Broadening this principle of minimum tax rates to all other energy
products whilst increasing the minimum rate for mineral oil taxes (EUenergy tax directive)
The then forthcoming accession made the modest breakthrough possible
as acceding countries would likely have to do more than the then EU-15.
On the other hand:
• The EU is the first and only region which requires an energy taxation from
all Member States. Several Member States made positive experiences with
ETR/EFR, hence this potential should be further exploited.
• Since 13.04.2011, the European Commission published a proposal for a
revision of the Energy Tax Directive.
8
11,1
12,3
13,2
13,5
14,2
14,9
Estonia
Slovenia
United Kingdom
Cyprus
Malta
EU-Average
40,3
41,3
Sweden
35,8
33,2
30,7
29,1
25,4
Italy
Hungary
Denmark
Bulgaria
Romania
Netherlands
21,4
149,445
213,830
254,200
291,475
306,780
332,426
358,450
403,210
412,559
Portugal
10,9
9,6
Czech Republic
Austria
Germany still has to catch up in this area
10,9
8,6
Spain
149,44493
Ireland
8,1
6,1
Germany
14,9
21,4
25,4
29,1
30,7
33,2
35,8
40,3
41,3
Finland
5,7
Poland
5,7
France
2,9
Greece
5,6
2,7
Slovakia
Latvia
2,1
Lithuania
EFR-Elements: Taxes on light heating fuel in Europe (€-Cent/liter)
9
All EU countries have some kind of green taxes
Belgium Denmark Finland
Taxes
CO2
SO2
NOx
Fuels
S in fuels
Car sales and use
Diff. annual car tax
Water effluents
Waste-end
Dangerous waste
Aviation noise
Tyres
Beverage cont.
Packaging
Bags
Pesticides
CFCs
Batteries
Light bulbs
PVC/phtalates
Lubrication oil
Fertilisers
Paper, board
Solvents
Raw materials
INTRODUCED:
1.
2.
3.
4.
France Germany
Italy
Holland Norway Sweden
UK
Witness of EU-Creativity!
Many roads to Brussels!
Autonomy from neighbours!
Similar situation in new MS
Examples from EEA 2005
1996
2000
2004
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Positive GDP-effects of ETR go up to 0.5 percent
GDP-EFFECT OF ETR (DIFFERENCE TO BASE CASE IN %)
COMETR: ETR produces a small
‘double dividend’ effect in every
country, with GDP increasing by up to
0.5 % compared to the reference case.
0.4% in
Germany
There are
no losers!
Source: COMETR 2007
11
EFFECT OF ETR ON GHG EMISSIONS (DIFFERENCE TO BASE CASE IN %)
Ecotaxes reduced GHG emissions by 2-6 percent
–3.3% in
Germany
12
Revision of the EU Energy Tax Directive
The person in charge of it is:
Rolf DIEMER
Head of Unit
Unit C2 – Environment and other Indirect Taxes
European Commission
DG Taxation and Customs Union
[SPA 3 05/110]
B-1049 Brussels – BELGIUM
Tel.: 0032-2-2961075
Rolf.Diemer@ec.europa.eu
http://ec.europa.eu/taxation_customs/taxation/excise_duties/gen_overview/index_en.htm
http://ec.europa.eu/taxation_customs/taxation/excise_duties/energy_products/index_en.htm
Policy background
• March 2007 European Council conclusions on energy and
climate topics and targets with several legislations following.
• EU climate and energy strategy (2013-2020):
 20% cut in emissions,
 20% improvement in energy efficiency against business-as-usual
 20% share of renewables by 2020
• Crisis exit strategy: Austerity packages and quality of
revenue
• Europe 2020 Strategy: sustainable growth for a more
resource efficient, greener and more competitive
economy, demand for an ETR/tax shift
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Two policy areas
• 20% cut in emissions by 2020 (30% in case of
international agreement reached)
• division into two areas:
Emission Trading System:
 EU cap
 single instrument
 uniform price signal
„Effort-sharing“:
national reduction
objectives, taking GDP into
account
Transferable!
Energy taxation, partly EUharmonised, but still many
national features.
15
Existing Directive on Energy Taxation: 2003/96/EC
• Energy products are only taxed when they are used as motor or
heating fuel
• Energy tax applies to electricity, although there are several
exemptions Member States can introduce
• Some sectors excluded: Energy products used as raw materials, for
the purposes of chemical reduction, in electrolytic and
metallurgical and in mineralogical processes, and nuclear fuels are
out of the scope of the Directive
• The "levels of taxation" applied by the Member States may not be
lower than the minimum rates set in the Directive (higher minima
for transport than for heating fuels)
• Possibility of tax exemption for biofuels
• Taxable base
– Mineral oil products: volume
– Coal, gas, electricity: energy content
16
Directive 2003/96/EC –
Shortcomings of the current state of play
• NO signal to reflect CO2 emissions of energy products
• NO signal to reflect the energy content of the product
used
• Little incentive to develop markets for alternative
energies
• NO European framework for CO2 taxation
• NO sufficient coverage of 50% of emissions outside ETS
• NO clear distinction with ETS: double burden or
loopholes to evade responsibility for emissions
17
INTERPLAY OF ECOTAX AND EMISSIONS TRADING IS QUITE COMPLEX
OVERLAPS OF ECOTAX AND EMISSIONS TRADING IN D
(x %) = Prozent der
Regelsteuersätze
im jeweiligen
Verbrauchsbereich
Öffentlicher Verkehr (56%)
Privater Verkehr
Weniger energieintensives
Produzierendes Gewerbe (60%)
Z.B. Alu - und
Chemieindustrie
Private und
öffentliche
EH, aber kein SAG*
Haushalte
Gewerbe/
Dienstleistungen
Energiewirtschaft
im EH, mit SAG*
Industrie anlagen
im EH,
mit SAG*
Kein
EH,
nur
SAG
*SAG = Spitzenausgleich;
verbleibende Grenzsteuerbelastungnur 3 %
Bereich unterliegt EH
(100%)
Ohne Ökosteuer, aber EH
Randbereiche im Emissionshandel (EH)
100% ÖSR:
z.B. Stromerzeugung >20
MW in Krankenhäusern
60% ÖSR:
Weniger energieintensive
Anlagen des Produzierenden
Gewerbes (z.B.
Maschinenbau/Elektronik) mit
EH-pflichtigen Emissionen
0% ÖSR:
Prozessemissionen (z.B. Kalk),
Dual Use (Kokskohle in
Stahlindustrie), Herstellerprivileg
(Eigenverbrauch Mineralölindustrie)
Quelle: FÖS-Analyse
18
Why revision of the EU Energy Tax Directive now?
• MS are designing now their strategies to meet agreed
targets in the most cost-effective way and exit the crisis
• MS and stakeholders need now legal certainty of
possible uses of taxes in this context
• Revision ideally applicable as from 01.01.2013 (third
phase Emission Trading System (ETS))
• Opportunity for a green tax shift: shift taxation from
labour to pollution and energy use to help create jobs
and boost growth
• Start building a green economy only possible with the
right incentive structures
19
New structure of energy taxation
• Tax reconstructed according to CO2 emissions and
energy content:
– A part based on CO2 emission of the energy product. CO2 taxation
would be zero for all sources of energy that currently are, or will
in the future, be recognised as CO2-free.
– A part based on energy content per GJ, regardless of the energy
product, thus providing an incentive to save energy.
• Because:
 logical and technology neutral approach
 automatic incentive for less polluting energy products and
generalised CO2 price signal vital for the shift towards low carbon
economy
 remove unjustified subsidies for certain fossil fuels (diesel, coal)
 consistent treatment of all energy sources
20
Link to Emission Trading System
Framework for CO2 taxation as complement to the EU
emission trading scheme
-
no double burden or regulation for business;
Level playing field for the sectors exposed to
carbon leakage
no overlap CO2 tax with ETS: CO2 tax
complements ETS with alternative market-based
instrument for small installations excluded from
the EU ETS
21
Motor fuels
• New minimum rates introduced in stages until 2018
– Tax based on CO2 emissions: 20€/t CO2 as of 2013
– Tax based on energy content: gradual increase to 9.6€/GJ by 2018
• This results in the following overall rates expressed in
current units:
Current
rate
1/1/2013
1/1/2015
1/1/2018
Petrol (euro per 1000 litres)
359
359
359
359
Diesel (euro per 1000 litres)
330
359
382
412
Kerosene (euro per 1000
litres)
330
350
370
386
LPG (euro per 1000 Kg)
125
125
311
501
Natural gas (euro per GJ)
2.6
2.6
6.6
10.8
22
Motor fuels
• As of 2023 MS also need to respect relationship
between the different products in their national rates
• Example: diesel / petrol:
– Currently: minima for petrol higher than for diesel (359 over 330
€/1000l) in spite of higher energy content of diesel
– Revision:
 Alignment of tax treatment on the basis of energy content and CO2 will lead to
higher per-volume rate for diesel (412 against 359 €/1000l) by 1/1/2018 (as 1
litre diesel emits around 16% more CO2 than 1 litre of petrol/ has higher energy
content)
 MS will have to reflect the relation in national rates, but will be given time for
adjustment until 2023.
 Possibility for MS to apply reduced rate to commercial diesel deleted (only used
by 5 MS)
– Consequences:
 stabilisation of current petrol/diesel demand split
 Under-capacity of Europe: security of supply will improve
23
Alternative motor fuels: LPG/CNG
• Currently:
– Minimum rates for LPG and CNG considerably lower than
for other motor fuels
– Possibility for MS to apply full exemption
• Revision:
– Alignment of tax treatment of LPG and CNG to other motor
fuels according to energy content in principle by 1/1/2021.
– Transitional period until 1/1/2023 during which MS may
continue to apply lower tax rate down to zero
24
Heating fuels
• New minimum rates introduced as of 2013
• As of 2013 MS need to respect relationship between the
different products in their national rates and fix equal
level for respective use
• 9 MS may postpone introduction for the CO2 part of the
tax until 2020
• MS will be able to set their own rates above the minima
25
Biofuels
• Currently:
– fully taxed (like equivalent fossil fuel) + option to fully
exempt (subject to State Aid control)
• Revision:
– alignment of tax treatment to other motor fuels according
to energy content (therefore removal of current
disadvantage stemming from generally lower energy
content of biofuels)
– no CO2 tax applies to sustainable biofuels as emission
factor is zero
– unsustainable biofuels will be treated as conventional fuels
– until 31/12/2023 MS may continue to apply lower specific
energy tax rate
26
Electricity/nuclear energy
• Currently:
– Electricity taxed when used ("at output").
– To avoid double taxation, energy products used for the generation
of electricity exempted from taxation, although MS retain the
right to tax those products for reasons of environmental policy.
– Nuclear fuels are no energy products for the purposes of Directive
2003/96/EC (out of the scope of the directive).
• Revision:
– No systematic change: taxation at output (energy tax only as no
emissions at point of use)
– Fuels used for generation mostly exempt from CO2 tax as subject
to ETS; CO2 tax to apply to small installations exempted from ETS
– Nuclear taxed as all other electricity; by definition there is no
CO2 element.
– Note: MS can adapt level of electricity tax independently of other
fuels
27
Possibility to apply reduced rates for business
• Currently:
– Possibility for reduction of tax rates down to minima if businesses
are energy intensive or if equivalent arrangements are in place
– Possibility for reduction of tax rates down to zero for energyintensive businesses or to 50% of Community minima for other
businesses if alternative measures deliver broadly equivalent
environmental effect to Community minima
• Revision:
– MS would retain flexibility to apply reduced tax rates for certain
businesses above the Community minima
– No possibility for MS to reduce energy-content based tax rates
below minima
– CO2-based taxation: a special compensation mechanism will apply
to installations from sectors under a risk of carbon leakage, which
will result in taxation below Community minima in some cases. MS
will be obliged to provide a tax credit to those installations based
on their past energy consumption, and calculated on the basis of
a reference fuel (benchmark).
28
Particular sector: agriculture
• Currently:
– fully taxed + option to fully exempt all energy products and
electricity used in agriculture
– MS can apply reduced tax rates to motor fuels used in
agriculture (e.g. 21 €/1000l for diesel)
• Revision:
– CO2 tax has to be applied in full, but COM will analyse
whether agriculture should also benefit from the tax credit
for carbon leakage sectors
– energy content part of the tax: possibility to fully exempt
if the sector provides a "counterpart" (equivalent measures
in terms of energy efficiency)- notion left to MS
– Diesel used in off road machineries (tractors): will be still
taxed as heating not as motor fuel (= lower rate)
29
Particular sector: households
• Currently:
– MS may apply rates to zero to natural gas, coal and
electricity if used for domestic heating
• Revision:
– MS will retain option to fully exempt households (both CO2
and energy content parts)
– exemption extended to all heating materials
30
Particular sectors: coal
• Currently:
– The most CO2 emitting and today the least taxed energy
product
– Important for Europe's energy security but needs to be used
in a sustainable way
• Revision:
– The revision will lead to an increase in the minimum tax for
coal
– postponement of CO2 part of taxation to after 2020 in
those MS where less effort is required for emission
reductions
– possibility to fully exempt households
31
Regionalisation of taxes
• Currently:
– No possibility for regional variation in tax rates in current
directive
– regions may be allowed to reduce rates on the basis of
individual derogations according to art. 19
• Revision:
– Possibility for individual MS to allow regions to increase
their tax rates over the national tax rate on the basis of
explicit country-specific authorisation (ES and FR)
32
Timing
• After about 2 years internal discussions the Commission
proposal was adopted and published on 13th April 2011
• EU-Presidencies’ attitude:
Hungary, Poland and Denmark will pick it up (25th May, 7th
June, 2 meetings under Polish Presidency planned so far)
Denmark wants to reach political agreement in I/2012
Cyprus could then reach formal agreement in II/2012
• Target of COM: Entry into force on 1.1.2013
• Or will it take again 5-6 years?
• We should push the Council for an agreement by December
2012 at the latest when the EU Budget will be decided. Then
the adoption of the ETD could be a crucial bargaining chip.
54
Evaluation of the new energy tax proposal
60
Raising ACTUAL diesel tax levels 10% over petrol:
great idea
61
Inflation correction: great idea
62
The big mistake:
keep bans on fuel tax for
aviation, shipping,
fisheries
64
Our ambition: get agreement on an EU energy tax law that
• Gets rid of tax bans in aviation / maritime
• Taxes fuels on energy/carbon content
• Is a guarantee for steady increase in fuel taxes
• Forces low-tax MS to move and hence
• Makes it easier for high tax MS to move
65
What we and you can do
66
Show that
• Fuel taxes have gone down, in EU and in member states
• Still, situation would be much worse without EU minimum tax
(job effects?)
• Cheap diesel and lack of inflation correction are key problems
as fuel taxes — like other environmental taxes — are quantitybased which means:
Their revenue is automatically devalued by inflation: In
Germany since 2003 alone, by 0.07 Euro/ liter. This equals more
than two steps of the 5x3Ct-increase of the ecotax)
67
Elements of arguments and a strategy
• Show that
• higher fuel taxes can save jobs
• ’95 g/km’ can be met without 50% diesel cars
• High-tax countries: create support for EU reform
• Low-tax countries: ‘shame’ strategy (Southern/Eastern
countries and Luxembourg!)
• Negotiate the ETD as far as possible to come to an
adoption in December 2012 when the EU budget will have
to be adopted and use it as bargaining chip of the
netpayer members.
68
Anything else we can still do?
69
Background Material on environmentally harmful subsidies in D
GBG proposed the following elements for the austerity package
•
And the German Government kindly implemented 80% of our proposals
•
http://www.foes.de/themen/sparpaket/
Some studies on phasing out environmentally harmful subsidies (though most in German):
•
Nuclear power: http://www.foes.de/pdf/2010_FOES_Foerderungen_Atomenergie_1950-2010.pdf
•
Hard Coal: http://www.foes.de/pdf/Kohlesubventionen_1950_2008.pdf
•
Comparison Nuclear and Coal:
http://www.foes.de/pdf/2010.10_FOES_Foerderungen_Strom_Atom_Kohle_Vergleich.pdf
•
In 2011 this comparison was complemented by the support given to renewable energies:
Hard coal 4.1 Ct/kWh
Nuclear 3.2 Ct/kWh
Renewables 2.2 Ct/kWh
Brown coal: 1.2 Ct/kWh
•
•
Overview of environmentally harmful subsidies in Germany:
http://www.greenpeace.de/fileadmin/gpd/user_upload/themen/energie/Greenpeace_Subventionsstudie_
final.pdf
•
Study on Company Car Taxation (including a joint EU-COM/GBE/EEB-event on 28.02.2011 launching this
and an EU-wide comparative study): http://files.foes.de/de/downloads/studien/FiwaDiwaRefFassung2.0.pdf
•
... And the study from the German Environment Protection Agency (UBA) on environmentally harmful
subsidies which – surprise, surprise – comprises a lot of figures fromoiur above mentioned study:
http://www.umweltbundesamt.de/uba-info-medien/4048.html
70
Thank you for your attention!
Kai Schlegelmilch
Vice President of
Green Budget Germany/Europe
Schwedenstraße 15a
13357 Berlin
Germany
Tel: +49-30-7623991-30
www.foes.de
Kai.Schlegelmilch@foes.de
72
6. Conclusions
Environmental fiscal reforms (EFR) are a crucial policy to
• make the market work for environmental protection
• get a society on a low-carbon trajectory;
• help develop new industries in the area of renewables and energy efficiency that will provide
sustainable jobs
• provide competitive advantages for these industry;
• contribute to restoring fiscal stability after the recession.
However:
• It needs a long-term effort to change the tax and fiscal structure
• Germany has not yet fully done its tasks, but at least it started and has taken major steps and a
cross-party consensus for such measures in general seems to be achieved.
 But fiscal changes pay off as environment and fiscal policy benefit
This is well understood by countries in transition which are increasingly competitors:
• Vietnam will introduce it in 2012, China is also introducing it between 2012-2015
In addition: Australia announced a carbon tax as well for 2012
Concluding: Europe needs to keep up a high level of ambition by
providing strong incentives, i.a. through energy and carbon taxation
83
Vielen Dank für Ihre Aufmerksamkeit!
Thank you for your attention!
Kai Schlegelmilch
Vice President of
Green Budget Germany/Europe
Schwedenstraße 15a
13357 Berlin
Germany
Tel: +49-30-7623991-30
www.foes.de, www.green-budget.eu
Kai.Schlegelmilch@foes.de
84