February 21, 2018 / 12:50 PM / in a year

EU should raise fossil fuel taxes to plug Brexit budget gap: former officials

Smoke rises from the coal power plant in Jaenschwalde, Germany February 3, 2018. REUTERS/Hannibal Hanschke

BRUSSELS (Reuters) - The European Union should raise taxes on fossil fuels to help meet goals on climate change and plug a budget gap after Britain leaves the bloc, former senior EU officials said in a letter to EU leaders.

European leaders will discuss options for the bloc’s next long term budget from 2021 to 2027 at a summit on Friday and the taxes were not among those laid out by the EU executive ahead of the talks.

Instead, the European Commission proposed that a share of the revenue from national auctions of carbon permits under the bloc’s cap-and-trade Emission Trading System be used.

“We call on the EU to create a contribution of the oil, gas and coal sector to the EU budget,” 19 economists wrote in the letter seen by Reuters on Wednesday and dated Feb. 20.

Italian prime minister Enrico Letta, former WTO director Pascal Lamy, former German finance minister Hans Eichel and Belgian economist Paul de Grauwe were among the signatories.

A “modest” price level of five euros per ton of carbon dioxide on coal, oil and gas burned in Europe would generate revenues of around 17 billion euros per year, they wrote.

The letter also proposed raising the EU’s minimum diesel tax, introducing a kerosene tax to tackle aviation emissions or applying a minimum value added tax to airplane tickets.

The Brussels-based climate campaign group Transport & Environment said the letter added clout to policy debates over using taxes to tackle air pollution from transport, Europe’s largest source of emissions.

As part of the Paris Agreement to limit global warming to no more than 2 degrees, the bloc has pledged to reduce greenhouse gas emissions by at least 40 percent below 1990 levels by 2030.

Reporting by Alissa de Carbonnel @AdeCar; Editing by Matthew Mpoke Bigg

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