Work Package 2: Quantitative Assessment of Carbon Taxes in the EU

Description

In the EU, CO2 emissions from industry and energy supply are regulated under the EU ETS. To control emissions from private households, transport and other small sources, in contrast, no comprehensive EU policy strategy is in place. In 2011, the European Commission came up with a proposal for a new energy taxation directive that would put more emphasis on the carbon content of fuels. This proposal has, however, not been adopted due to resistance of some Member States and the requirement of unanimity for EU tax law. Although some climate change aspects have been taken up in the Member States' energy taxation following the EU's energy taxation directive in 2003, the existing energy or carbon taxes serve mainly a revenue raising purpose and only in some cases an explicit reduction of emissions is intended. Energy tax rates still differ widely between Member States and energy sources, also regarding fuels consumed in the transport sector (see Figure).

In this work package, a cross-country comparison of energy taxes will be performed. The focus lies on taxes that have other than merely fiscal objectives. Based on the European Commission's taxation reports, countries with the most ambitious tax rates are identified for the most important fuel types and end-user categories. For countries applying significant CO2 taxes, a systematic assessment of carbon taxes will be performed along the criteria compiled in Work Package 1, i.e. the development of the taxes is analysed i.a. in terms of the tax rates applied (and their development over time), potential tax benefits and tax exemptions, and the development of tax revenues and their usage.

In addition, the outcomes of the introduction of the tax are investigated in a meta-analysis of studies available for the selected 'front runner' countries. In this meta-analysis, the effectiveness of the taxes is assessed in more detail, as well as the observed impacts on economic growth and employment, but also the related innovation and distribution effects.

WP2 is structured in two tasks:

  1. A cross-country comparison of energy taxes in EU Member States will be performed. The focus lies on taxes that have other than merely fiscal objectives. Energy tax rates by fuel and end-user category are reviewed based on the EU's taxation reports. MS with the most ambitious tax rates are identified and the CO2 component included in the taxes is assessed. For MS applying significant CO2 taxes, a systematic assessment will be performed based on the criteria developed in WP1.
  2. The outcomes of the introduction of the tax will be investigated: The development of CO2 emissions before and after the introduction of the carbon tax will be analysed and a meta-analysis of studies and evaluations available for these countries will be conducted in order to assess the effectiveness of the taxes in more detail. In addition the observed impacts on economic growth and employment, but also the related innovation and distribution effects will be reviewed.

Petrol tax rates in the EU-28 (2016)

Petrol tax rates in the EU-28 (2016)

Source: EU Excise Duty Tables, January 2016, own calculations

Gasoil tax rates in the EU-28 (2016)

Gasoil tax rates in the EU-28 (2016)

Source: EU Excise Duty Tables, January 2016, own calculations

Last update: 6 April 2016