1 / 27

Status and trends of use of fiscal instruments for Sustainable Development at the EU level

Status and trends of use of fiscal instruments for Sustainable Development at the EU level. John Hontelez Secretary General European Environmental Bureau (EEB) Seminar on Ecological Tax Reform; Tallinn, Estonia. April 11, 2006. Structure of Presentation. EEB and Market Based Instruments

sen
Download Presentation

Status and trends of use of fiscal instruments for Sustainable Development at the EU level

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Status and trends of use of fiscal instruments for Sustainable Development at the EU level John Hontelez Secretary General European Environmental Bureau (EEB) Seminar on Ecological Tax Reform; Tallinn, Estonia. April 11, 2006.

  2. Structure of Presentation • EEB and Market Based Instruments • Major intervention: Emission Trading • Poor intervention: Environmental Taxes on Energy Products • Failure: CO2/Energy Tax • Potential: Public Procurement, Transport, Liability • Coming?: Aviation, Green Paper • On waiting list: Subsidies • “Make the Market Work For the Environment”

  3. EEB AND MARKET INSTRUMENTS • Market Instruments essential tools for environmental policies and sustainable development • Working Group on Environmental Fiscal Reform Since 2001: Campaign for 10% Fiscal Reform in 20 years: shifting taxation burden away from labour to resource use and pollution, and subsidy reform • Coalition with European Trade Unions Confederation and Platform of European Social NGOs • Pressure upon Commission and Governments. • Limited success, but inclusion in “Lisbon thinking”.

  4. Major: EU Emissions Trading Scheme (I) • Operational since January 2005: pilot phase • 1st supranational ET scheme in the world • 1st EU wide economic instrument • Purpose: • emission reductions at lowest cost (to help MS achieve Kyoto targets); • encourage innovation – price signals to invest in cleaner technologies and decarbonisation.

  5. Major:EU Emissions Trading Scheme (II) • Covers CO2 emissions from about 11.000 installations, including all large installations producing power and heat, oil refineries, cokes ovens, ferrous metals production, cement, glass tiles, bricks and porcelain, pulp, paper and board • Structure: ‘cap-and-trade’ system; allowances are ‘grandfathered’; ‘banking’ and borrowing; monitoring by ‘national competent authority’. • Phase II: 2008-2012- first Kyoto commitment period

  6. EU Emissions Trading Scheme – environmental benefits?  Incentives: EU ETS does not provide enough incentives for long term investments for industry Targets: reductions only vis-à-vis Business As Usual projections for the future, may lead to increases even - threaten Kyoto targets Rules: little use of auctioning  Domestic action: worrying trend to rely on JI/CDM for Kyoto compliance – is supplementarity respected?  Transparency: insufficient, and no independent assessment of data for projections/allocations No environmental benefits so far – Future improvements are necessary!

  7. The way forward: ETS Targets • Reductions over current levels required. MS have to use EU ETS for Kyoto compliance and work towards Greenhouse Gas emissions reduction of 30% for the EU by 2020. • Lack of Kyoto constraint no excuse for over-allocations. Rules • Focus more on auctioning (10% auctioning allowance in 2nd phase) • Product-specific benchmarks (not fuel/process specific!) • Full transparency of methodologies applied, the data used, as well as the process - needs wide public participation

  8. Poor: Energy Products Tax Directive Entered into force January 2004, after 6 years of negotiations! • Targets the consumer – aiming to reduce use of mineral oils, natural gas, electricity and coal. • Sets minimum environmental tax rates for fuels for all MS. • Resistance from Member States combined with unanimity requirement resulted into: low minimum tax rates; too many exemptions • Review only possible after 10 years!

  9. Failure: CO2/Energy Tax • Proposed in 1990 by Commission, ahead of Rio Conference in 1992 • Aimed for a progressive CO2/Energy Tax on fossil fuels starting at 3 Euro/barrel in 1993 to 10 Euro/barrel in 2000 • Strong resistance by Member States • Burried officially a few years ago

  10. Potential: Public Procurement (I) • Public procurement accounts for 16% of EU GDP • Potential tool for creating huge markets for environmentally friendly products and services. • In 2004: Two Directives revising rules on public expenditure: a general one (2004/18/EC) and Utilities Directive (2004/17/EC) • Implementation into national legislation by 31 Jan 2006 • Allows, but not stimulates, green public procurement

  11. Potential: Public Procurement (II) Only 7 MS practice green public procurement (EC Report) Some have green public procurement targets for vehicles incorporating environmental concerns: • Belgium – 50% of new purchase or lease vehicles to have CO2 emissions less than 145g/km for diesel and 160g/km for petrol cars • France: all passenger and light commercial vehicles for central authorities, CO2 emission less than 140g/km

  12. Potential: Public Procurement (III) Seen as tool for Sustainable Development: • 2006 Spring European Council Conclusions: “…exploration of specific actions (…) more sustainable consumption and production patterns at EU and global level (…) and fostering green public procurement…” • can boost the sales of environmentally friendly technologies, eco-efficiency (energy, other goods and services); respect for labour standards and working conditions (domestically and globally); accessibility; boost EU’s competitiveness globally, etc BUT: no common practice yet.

  13. Potential: Public Procurement (IV) Why? Possible reasons: • ‘soft’ tool, voluntary – local public authorities not obliged to implement it; lack of information and a range of other reasons, but legal basis exists to allow for progressive behaviour by local authorities • ‘indirect’ market stimulus: a tool that can stimulate the market, but its stimulus is dependent on political leadership and will at national and local government levels; need for combined efforts to see real changes in market signals Conclusions (i): action! As in the 2006 Spring Council Conclusions: “strong promotion and diffusion of eco-innovations and environmental technologies, inter alia through the Environmental Technology Action Plan and considering setting performance targets”.

  14. The way forward:Public Procurement • The EU to launch a major public procurement campaign to boost the use of energy efficient products and services. • Use of the proposals developed by the coalition of the EEB, ETUC and the Social Platform – in "Investing for a Sustainable Future" (November 2003), focussing on the housing and transport sectors. • Aim at a 100% green public procurement by 2010 at all levels of government [is also official objective Dutch politics now]

  15. Potential: Road transport interventions (I) • Commission and European Council in 2001, Goteborg: by 2005 prices for transport, including air, "reflect their costs to society“ Not achieved, but some steps: Eurovignette: Directive on the charging of heavy goods vehicles for the use of certain infrastructures; adopted by Transport Council on March 27, 2006. Member States to apply charging systems on TEN-T or any parallel or other roads; can include all vehicles above 3.5 ton, after 2012 obligatory; can differentiate according to category of vehicle; infrastructure in sensitive mountainous areas, can include mark-up; can go further and introduce additional charging systems Conclusion: have to wait and see

  16. Potential: Road transport interventions (II) Proposal for Passenger Cars (2005), including: • abolition of car registration taxes in 5/10 years; • refunding mechanism while abolition is pending; • a CO2 element in tax base UK 1st EU country to introduce CO2 passenger car taxation in 2001; also introduced CO2 differentiated tax for company cars, resulting in smaller company cars. Obstacles: taxation requires unanimity; most countries do not want to give up registration taxes Conclusions: • Keep registration tax • Use strongly progressive rate of CO2-based tax and introduce it for company cars as well • Align taxation with labelling so consumers are aware

  17. Potential:Environmental liability • One of 6th EAP’s ‘strategic approaches’ • Directive 2004/35/EC: combines compensation payments and requirements for primary and complementary remediation measures • But: no insurance obligation • Transposition deadline: 30 April 2007 • Conclusion: bring insurance obligation into the national legislation!

  18. Coming? Aviation (I) • Aviation sector historical privileges - no taxation of fuel and international tickets • Exemption from Kyoto Protocol emissions reductions • Main options considered: • Fuel taxation – opposed by politicians • Emission charges – opposed by industry • Emissions trading • Environmentally and economically efficient (taps cheapest reduction potentials, environmental outcome certain) • No explicit references in Chicago convention, bilateral air service agreements etc. (less legal constraints) • Considered preferable by airlines and strongly supported by airports

  19. Coming? Aviation (II) • Aviation WG under the ECCP started working in late Autumn 2005 • Report from WG by 30 April 2006 • Report by EC on review of ETS by 30 June 2006 • Legislative proposal end of 2006

  20. The Way Forward:Aviation • End privileged treatment through other policies and link aviation to ETS, aim for harmonised rules and central administration • Equal efforts: aviation must contribute to at least similar reductions compared to other sectors (EU target -8% from 1990 levels) • All impacts addressed: distinct measures package for all impacts - integrate more than CO2 in ETS • Maximum scope: widest geographical coverage (all flights departing and landing in the EU) • Full internalisation of climate impacts: every ton of CO2 must get a price tag - auctioning to disseminate allowances

  21. Coming? Green Paper on market based instruments • Delayed due to internal problems in Commission • Aimed as guide to MS on the use of Market Based Instruments • Partly overdue: EU ETS for example already on steam. • Now expected for April 2006 • Commission might propose a new approach to avoid unanimity requirement: Article 96 of EC Treaty allows the Commission to take action in order to prevent distortion of the common market due to national actions. This could also work negatively against progressive countries! • Commission might als propose use of “enhanced co-operation” • Possibly: proposal for revision of the Energy Tax Directive; • cover many areas, ranging from energy and transport to waste and biodiversity protection

  22. Waiting list: reform of environmentally perverse subsidies (I) No shortage of good intentions. • 2001 Goteborg Conclusions • 2002 6EAP: called for ‘encouraging reforms of subsidies harmful to the environment’ • 2003 European Council requested ECOFIN Council to make progress on tackling harmful subsidies • 2006 Spring European Council conclusions: “Council endorsed (…) further exploration of appropriate incentives and disincentives, and the reform of subsidies that have considerable negative effects on the environment and are incompatible with sustainable development, with a view of gradually eliminating them.” BUT: still waiting….

  23. Waiting list: reform of environmentally perverse subsidies (II) • Some attempts • Reforms of the Common Agriculture Policy (CAP) and Common Fisheries Policy (CFP) • Review of environment state aid guidelines: analysis of public consultation is currently underway, results expected April 2006; not much NGO involvement • Conclusion: lack of political will at EU and MS is main obstacle

  24. The way forward:Subsidy reform • Phase out energy tax reductions and exemptions by 2010 • End all state aid for coal mining no later than 2010 • Stop all kinds of preferential regulation for nuclear energy • Phase-out and reform Environmentally Hazardous Subsidies (EHS) as part of implementing the EU Sustainable Development Strategy • Increase general pressure on Member States (MS) and establish link between Euro Stability Criteria and EHS removal • Publish inventories of EHS in MS and develop them into a comprehensive action plan to phase-out and redesign these subsidies • Start nationwide and EU-wide public discussion on EHS with the involvement of NGOs. EEB publication December 2004

  25. The way forward:Breaking the unanimity deadlock for tax reform (I) • Start an initiative to promote environmental taxation reforms in all Member States, around a common objective of a 10% tax-base shift away from labour to environmental pressures, within a period of 5 years. As a detailed legal instrument might be difficult to achieve (the unanimity requirement), the alternative of Open Method of Coordination should be agreed.

  26. The way forward:Breaking the unanimity deadlock for tax reform (II) Or: Enhanced Cooperation: Use opportunities such as provided by a new Finnish environmental policy initiative – work together with ‘frontrunners’ and create a common agreement and roadmap of how to advance EFR within those MS; need a clear deadline and objectives (internalisation of external costs; social benefits – tax shift from labour to resource use, etc) and ways to attract other MS

  27. FURTHER READING WWW.EEB.ORG

More Related