The European Commission's new proposal should be rejected because it fails to address the main aims of the EU, namely to 1) maintain the proper functioning of the internal market, 2) make more efficient use of energy and 3) promote cleaner energy sources

Brussels – The European Commission's new proposal to revise the EU Directive on the taxation of energy products aims to ensure that the taxation of energy maintains the proper functioning of the internal market, contributes to the fulfilment of the EU objectives to make more efficient use of energy and to promote cleaner energy sources by levying taxes to influence consumer behaviour. This purely fiscal policy will fail.

In fact, this policy will tax various energy products not based simply on their weight or volume, as is the case for diesel fuel, but exclusively in a complex manner with numerous exemptions as a function of their CO2 emissions.

However, in order to achieve an effective reduction in CO2 emissions, the proposed new tax should focus on the sectors which are the main consumers of fossil energy namely electricity production, heating and industrial processes, as well as air, rail and sea transport, which represent more than 75% of the total fossil fuel consumption. But as all these sectors will continue to benefit from numerous specific exemptions, CO2 emissions will not be reduced.

While the Directive does not apply to all those sectors consuming the same fossil fuel, but in far larger quantities than road transport, this EC proposal targets the commercial road transport sector which represents only 3% of CO2 emissions, which will be taxed twice through the CO2 tax and by increasing the tax on diesel fuel to match that of petrol fuel. 

To achieve the set objective of more efficient use of energy, this new EC fiscal proposal should be more balanced by subjecting every mode of transport to the same excise duties, VAT and CO2 tax to obtain the same energy savings as those attained by the heavily taxed road transport industry.

The EC fiscal policy, where up to now air, rail and sea transport do not pay any excise duties, VAT and will benefit from the numerous exemptions from the new proposed CO2 tax, whilst road transport will not only pay the new CO2 tax but will continue to pay 3-4 times the OPEC price at the pump, is totally incomprehensible.

Moreover, this hugely imbalanced EC fiscal policy will severely penalise road transport, which carries more than 90% of EU goods in terms of value. Thus the first objective of the proposal to maintain the proper functioning of the internal market will not be attained. Rather, it will severely penalise EU production and trade and thus lead to higher unemployment.

Nor will the second objective, to make more efficient use of energy, be achieved. As, all the main users do not pay excise duties, VAT and will benefit from numerous specific exemptions they will have no incentive to practice energy saving or to change their behaviour.

Furthermore, the EC aim to promote cleaner energy sources by levying more taxes, notably on the diesel fuel used by the commercial road transport sector, will not be achieved since the commercial road transport sector has no viable energy alternatives to diesel fuel.

IRU Secretary General, Martin Marmy, said: "This EC proposal will have no impact on greening commercial road transport. It is one thing to encourage a shift to greener fuels through increasing taxes when viable alternative fuels for commercial vehicles exist, but as they don't, the EC proposal will simply be adding yet another tax burden on road transport, which is a vital production tool, thus penalising the EU economy and employment." He concluded that “This EC proposal, which will penalise the economy and employment without achieving the three objective set, must be rejected.”

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Read the IRU Position on Energy Taxation

Read the IRU Position on the effectiveness of CO2 emission taxation

Read the IRU Resolution on the fuel price crisis

Read the IRU 30-by-30 Resolution

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