European states split over EU-wide carbon tax plan

BRUSSELS Tue Oct 6, 2009 11:12am EDT

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BRUSSELS (Reuters) - European Union countries are split over plans to introduce an EU-wide carbon tax on fuel, which could be proposed early next year.

The idea, which EU officials say has gained fresh momentum after losing impetus earlier this year, is supported by Sweden, which has its own carbon tax scheme, and France, which will implement a levy next February. But it is opposed by Britain.

The tax would add to the cost of fuel, encouraging fuel-efficient behavior and channeling funds to governments that might be used to ease the impact of climate change.

"We do not support the idea of a mandatory, pan-European carbon tax," a British diplomat said. "There needs to be clear justification for taking fiscal action at an EU, rather than national or local, level."

European tax commissioner Laszlo Kovacs raised the issue of a possible carbon tax to cover sectors such as road transport and agriculture at a meeting of the 27-country EU's finance ministers last week in Gothenburg, Sweden.

"The introduction of a new tax in the European Union has never been easy and particularly it's not easy in the time of a financial and economic crisis," Kovacs told reporters.

The levy would apply in areas not covered by the EU's main tool against climate change, the Emissions Trading Scheme, which forces industry to buy permits to emit carbon dioxide.

Like all EU tax measures, it would require the unanimous agreement of member states, and the assent of the European Parliament, to be adopted -- a lengthy process.

Clues to how it might appear come from a draft proposal that has been circulating in Brussels since early this year and has met with stiff criticism from many sides.

The early draft, obtained by Reuters, describes plans to align the taxation of diesel and petrol, but to leave out fuels made from plant biomass, such as bioethanol and biodiesel.

Petrol, jet fuel, diesel and gas oil would be taxed at anywhere between 0.01 and 0.03 euro (1.4 to 4.4 U.S. cents) per kg of carbon dioxide emitted.

The initial proposal from the European Union's executive the European Commission, is unlikely to come before next year after a new team of commissioners is picked.

"How it looks depends on how the new Commission sees things," a Commission spokeswoman said. "All we can say is that a revision of energy taxation will come and it will reflect the carbon content of fuels."

(Reporting by Pete Harrison, editing by Anthony Barker)

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