The European Union next week will propose taxing transport and heating fuels according to their greenhouse-gas emissions as well as their energy content, introducing a climate-change component in EU tax rules for the first time, after years of negotiations.
The European Commission, which has executive powers in the European Union, will propose a minimum rate of €20 ($29) a metric ton of CO2 emitted by products like gasoline, diesel, natural gas and coal starting in 2013, a draft document obtained by Dow Jones Newswires shows.
According to the document—which is the draft revision of an existing law on taxation of energy products, and might still change before being made public Wednesday—the commission will also propose a gradual increase of a minimum levy on diesel to bring it to the same as that on gasoline by 2018.
“Taxation related to CO2 emissions can be a cost-effective means for member states to achieve the reductions of greenhouse gases necessary” to reach the EU’s 2020 climate change targets, the draft law said. EU member countries have set themselves a goal of cutting CO2 emissions by 20% compared with 1990 levels by 2020.
The EU’s carbon market, the Emissions Trading System, is the flagship program to reach that target, but it covers only part of the economic activities, and the levy on CO2 is designed to complement it.
Some national governments, such as the U.K. and Ireland, are traditionally reluctant to cede control over tax policies. The EU has been able to introduce floor levels for taxation in some areas, including fuels, but any decision has to be taken by unanimity among the 27 countries, a rule that has slowed the process and has prevented the commission from proposing plans for a CO2 tax for years.