An EU-wide carbon tax?

The European Union plans to propose a minimum carbon tax be introduced by its member countries, according to New Energy Finance, which has seen a draft directive:

The proposed directive introduces minimum levels of taxation on different types of fuels linked to the intensity of their emissions, to be effective from 2013. The tax would apply to fossil fuel users that fall outside the EU ETS, such as small installations. But under the EU document, member states can still impose higher taxes if they wish.

The EU’s emissions trading system, or ETS, only covers certain sectors and does not cover businesses below a certain size. A few smaller EU members already tax carbon from some users not covered by the ETS, and France is set to join them. But whether an EU-wide directive would be supported by member states is another question; as NEF notes, several countries including the UK have already stated they would oppose such a move.

Meanwhile the EU’s ability to set carbon limits in the near term suffered something of a blow yesterday, when Poland and Estonia won a court ruling against the EU determining how they can allocate allowances to their own industries covered by the EU emissions trading system.

The EU’s emissions trading system initially gave national governments wide authority to determine how many allowances were given out to polluting industries, which was largely blamed for an over-allocation of allowances. Six similar cases are under way, but as the New York Times notes, after 2012 the EU will likely set allocations itself anyway, meaning the issue will be off the table.

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