* EU refining system in diesel deficit
* Commission worried about health, climate implications
* High levels of opposition to change expected
By Barbara Lewis
BRUSSELS, Jan 11 EU officials are to debate a new set of tax proposals to promote clean fuel and erode fiscal advantages that have made diesel relatively cheap, a document seen by Reuters showed.
The Commission has long been seeking to change energy taxation, but some member states have repeatedly thwarted progress and are likely to continue to do so.
Taxation law in the European Union requires the unanimity of all 27 member states, which is almost impossible to achieve.
Luxembourg, for instance, has been generating revenue through particularly low taxes on diesel, meaning vehicles, notably lorries carrying freight, stop in the centrally located nation to refuel.
Ahead of a working party meeting on Jan. 23 that will bring together representatives of member states, an internal European presidency note dated January 9 on minimum rates for energy products revives the idea of taxing fuels according to carbon dioxide emissions and energy content.
For now, fuel is taxed based on volume.
While trying to lower carbon emissions, the Commission, the EU executive, has said it is "fuel neutral" when it comes to setting minimum taxation levels.
Because a litre of diesel contains more energy and more carbon than a litre of gasoline, the changes under discussion, if agreed, could mean minimum tax rates per litre of diesel would eventually be higher than for gasoline.
Currently diesel is cheaper than petrol in nearly all EU states, with Britain a notable exception.
While offering some exemptions, the new proposals would over time provide incentives for sustainable biofuels, as well as natural gas and liquefied petroleum gas (LPG).
Diesel use is a major concern for the Commission because the European Union's refineries cannot produce enough of it and the bloc often has to import diesel, while exporting surplus gasoline, sometimes at a loss.
Diesel fumes have also been named as a cancer risk by the World Health Organization.
Earlier this week, Environment Commissioner Janez Potocnik said it was crucial to reduce diesel emissions as part of efforts to improve air quality.
He is pressing to improve the accuracy of vehicle testing because, especially for diesel vehicles, there are major discrepancies between emissions recorded in the laboratory and "real-world" emissions generated in day-to-day use.
Algirdas Semeta, the European commissioner in charge of taxation policy, has sought to fend off potential opposition to any tax changes from diesel-engine giants, such as Volkswagen , saying a slow phase-in would give plenty of time to adapt engine requirements.
Environmental groups agree diesel needs to be taxed more.
A group of non-governmental organisations in December wrote to EU finance ministers in a letter seen by Reuters calling on them "to support a significant increase in the minimum levels of taxation of diesel fuel for transport purposes".
Luxembourg's diesel rates are good for generating revenue for it, but so-called "tank tourism" was negative for the nation's neighbours, said the letter, signed by more than 30 campaign groups.
Environment groups have also raised concerns about whether biofuels classed as sustainable really are.
The European Commission last year approved a scheme that would certify as sustainable transport fuel made from palm oil, which has been condemned by environmental groups as one of the most damaging sources of biodiesel.