The EU Energy Tax Directive and its forthcoming revision

Transcription

1 The EU Energy Tax Directive and its forthcoming revision Could it become a useful market based instrument for environmental policy? Presentation by Yannis Palaiokrassas former European Commissioner for the Environment, member of the Supervisory Board of GBG, Vice President of ELLINIKI ETAIRIA Yannis Palaiokrassas 1 EU energy taxation is a highly complex problem Important tool for three key EU policies Energy policy (the three 20s target) Environment policy (integrating externalities) Climate change policy (Climate change policy as indicated in relevant Green Paper addresses a much broader spectrum of problems than energy) Some interesting Commission ideas were vented in Green Paper on MBIs (March 2007) Separation of energy from environmental component Differentiation according to use (heating v. transport) Exemption of industries covered by ETS Yannis Palaiokrassas 2

2 the proposed revision Unfortunately the revision proposed in March 2007 [COM(2007)52] is restricted to small increases in petrol (5.8%) and diesel (15.2%). It proposes the abolition of many general and national derogations. But does not touch other fuels, such as coal or natural gas, nor electricity. It does not contain any of the interesting ideas expressed in the Green Paper on MBIs Yannis Palaiokrassas 3 A soft revision is of no use Right pricing of energy is absolutely vital for: Reversal of climate change and human survival Restructuring EU energy sector and ensuring security of production and supply Too little, too late is a recipe for disaster. Resorting to coal or nuclear is no way to face climate change and the end of the oil era Need for clear, radical and brave decisions A timid revision of the Energy Tax Directive will not meet the challenge Yannis Palaiokrassas 4

3 The basic targets and steps Decoupling energy from growth (vast margins in reducing waste, increasing efficiency, changing the fuel mix towards valid R.E.S. including new ones) Getting prices right a functional ETS: auctioning of permits a 2-tier energy and environment tax: to eliminate waste and fully cover environmental costs enforcement of cost-effective road, air and sea pricing (to cover other transport externalities) removal of all open and hidden subsidies (including cross subsidisation through tariffs) Yannis Palaiokrassas 5 External Costs (A) EXTERNAL COST FOR ELECTRICITY (IN (IN CENT PER KWH) Country coal & lignite AT BE 4-15 DE 3-6 DK 4-7 ES 5-8 FI 2-4 FR 7-10 GR 5-8 IE 6-8 IT NL 3-4 NO PT 4-7 SE 2-4 UK 4-7 oil gas nuclear hydro wind Source: External Costs. Research results on socio-environmental damages due to electricity and transport. European Commission. Directorate General for Research. EUR Yannis Palaiokrassas 6

4 External costs (B) The same report states that integration of such costs in prices would double them. An application of the Externe Model to Greece in 2002 showed that external costs of transport and energy were 14.2% of gdp. Only 1/5 of these were covered by taxes. The minimum rates in the current Energy Tax Directive cover only 0.1 cent/kwh in electricity (compared to an estimated 3 cent/kwh of the Table) and about /1000 kg on oil products. The EEA report on external costs of transport, estimated them at 8% of GDP in Eurostat estimated environment taxes on transport at 0.6% of gdp and energy taxes at 2% of gdp in the same year, covering only 1/3 of externalities Yannis Palaiokrassas 7 Action required 1. A functional cost effective ETS Auctioning permits, instead of distributing them, on basis of existing emissions (grandfathering) Minimum floor price set in accordance with national target 2. A realistic revision of Energy Tax Minimum 2-tier rates set at levels to a) induce energy saving and b) cover environmental costs 3. Pricing of the use of highways, airways* and seaways* (*airports and ports as a first proxy) Assuming that energy external costs are covered by 1&2, other externalities of transport should be covered by extra pricing, especially of congestion Yannis Palaiokrassas 8

5 A realistic revision of the Energy Tax Directive Extended to cover all fuels and use of energy, with very few derogations Two components (energy* and environment) * Participants in ETS exempt from part of environment component only Level set to cover full costs (in two stages perhaps 2015 and 2020 v & 2014) a very approximate estimate is that rates on fuels for consumption would increase by a further 50% and on electricity would double. rates for industrial or commercial use or heating are a big question, but should be raised substantially Yannis Palaiokrassas 9 The rationale of the proposals Energy component targeted at limiting waste. Environment component targeted at emissions and environment costs. ETS, realistically priced, is a proxy for CO 2 emissions. Participants should be exempted from part of environment component only. Transport has environmental impacts, other than energy, (e.g. noise) to be covered by separate pricing schemes. All taxes and charges should be escalated with volumes, wherever possible (e.g. in electricity) to discourage increased consumption, especially at peaks. GETTING PRICES RIGHT is not simply an environmental slogan, but an economic necessity. It leads to big gains in efficiency, restructuring and new technology and jobs Yannis Palaiokrassas 10

6 Some practical examples Electricity companies, participating in ETS, will not pay part of the environment component in the Energy Directive, but they will pay the rest plus the energy component on coal, gas and other fuels, not on RES. Aviation and shipping Cos participating in ETS will be similarly exempt, but will pay for noise, landuse of ports and airports, use of rivers and canals or congested traffic corridors. Land transport with no part in ETS will fully pay energy taxes, plus vehicle taxes, plus charges for road use escalated for congestion Yannis Palaiokrassas 11 Time is running out The EU target of limiting temperature rise to 2 o C is already out of reach. Even 4 o is debatable. Drastic measures should be adopted yesterday; today will not suffice; tomorrow might be a disaster. I was fighting for a CO 2 /energy tax 15 years ago. Climate change is not the only nightmare. Life quality is deteriorating, the environment is downgraded, species are lost even without climate change. Must we burn SUSTAINABILITY in the furnace of energy overuse? Yannis Palaiokrassas 12