Speak Up Energy

But European governments are split on how to deal with the crisis. While protestors and industry are demanding immediate tax breaks, many governments and consumer groups are concerned that this will simply lead to a loss of public revenues and encourage unsustainable consumption patterns. Last week (27 May), French President Nicolas Sarkozy sided with the former group, calling for an EU-wide cap on value-added taxes on fuel. Indeed, VAT accounts for some 70% of prices at the pump in much of
Europe and according to Sarkozy, the French government is earning an additional €150-170 million in VAT receipts every three months as a result of the explosion in oil prices. This money could be used to offset the worst impact of the fuel price rises, he said. Sarkozy’s Prime Minister François Fillon has suggested the issue will be discussed at the next European Council on 19-20 June.But, despite support from Portuguese Economy Minister Manuel Pinho, Sarkozy’s proposals have already been met with widespread scepticism from the Commission and other European governments.
Slovenia, which currently holds the rotating EU presidency, refused to call an emergency meeting as requested by Pinho.
Austria’s Finance Minister Wilhelm Molterer warned of the long-term effect tax cuts would have on state revenues, asking: “What will you do when prices fall again, reintroduce the tax? I’d like to hear the political discussions then!” The European Commission warned against starting a “vicious circle” whereby if lower taxes are approved for fishermen, “road haulers, taxi drivers and so on, all of whom will seek the same special treatment, and not only in one country but in all the others, […] will be complaining rightfully about unfair competition”. Amelia Torres, a spokeswoman for Joaquin Almunia, the EU commissioner for monetary affairs, further noted that tax cuts would send the wrong signal to oil-producing countries that European states were willing to absorb rising gas prices. “Modifying the fiscality of fuel to fight the rise in oil prices would send a very bad signal to oil-producing countries. We would be saying that [they] can raise oil prices and this will be paid for by the taxes of Europeans,” she said.

Carbon markets up

On a more positive note, carbon market analysts were optimistic as prices of tradable CO2 allowances rose by as much as 25% in the past three months. According to the WWF, the hike has been driven by electricity producers’ switch from gas to coal – which although cheaper, emits more CO2 per watt, warranting the purchase of additional emission permits.

Rock-bottom carbon prices, due to too high an allocation of pollution permits since the scheme first started in 2005, had raised serious questions as to the credibility of the EU’s flagship scheme for reducing greenhouse gas emissions in the bloc. But the current surge in prices should give a boost to the cap-and-trade principle ahead of key global climate change conferences this year.

From EurActiv

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