Work Package 3: Implementation Issues and Barriers


Based on an assessment of carbon taxes at EU level and in selected ‘front runner’ countries, WP3 identified barriers and success factors for the implementation of carbon taxes at the different levels of governance from a legal / political science perspective. There were two central tasks in this work package:

  1. Implementation Issues and Barriers at EU level
  2. Implementation Issues and Barriers at Member State level

Implementation Issues and Barriers at EU level

The legal / political economy barriers to introducing carbon taxes at EU level were assessed in this task. These barriers stem from the uncertainty relating to the voting procedures when proposing an environmental measure. The general background on EU legislative procedures relevant for adopting a carbon tax and subsequently several adoption issues and barriers were addressed. These include the unanimity requirement, national legal frameworks, national interests and institutional memory.

Implementation Issues and Barriers at Member State level

This task examined the implementation issues and barriers for introducing a carbon tax at Member State level. Important success determinants are related to the political economy of introducing taxes (negotiations with stakeholders, concessions, changes in proposed legislation, compromises, revenue raising etc.) which translate inter alia into competitiveness issues, and fairness / equity / distributional issues. The analysis focused on the 'front runner' countries identified in Work Package 2 (Denmark, Sweden, Finland), which have been very successful in terms of the introduction of carbon taxes. The approach was inherently multifaceted taking economic and political aspects into account. It relied on a dual methodological approach employing a literature study with interviews. Interview partners were civil servants in the respective case study countries who had been selected on the basis of their experience.

Results and Conclusions

Implementation Issues and Barriers at EU level

The first part of the analysis was concerned with introduction issues and barriers of a CO2 tax at EU level. The review of the EU legislative procedures indicated that there is legal uncertainty relating to the actual wording and application of the environmental and energy legal basis and if the ordinary legislative procedure employing qualified majority voting could be relied upon. If a CO2 tax would need to be introduced by means of the special legislative procedure, unanimity voting would be required. In practice there has not been an example where a legislative act was based on the unanimity requirement under Articles 192(2)(a) or 194(3) TFEU. It is submitted that the Commission may refrain from taking legislative action under the unanimity requirement if it is apparent from informal pulsing that there is significant Member State opposition. Additional barriers to introducing a CO2 tax at EU level stem from national legal systems that influence the transposition of EU rules and co-determine the position of a Member State in the Council. It is of course not only the legal embedding that is important in this respect but also the national interest of a Member State. Even though the Member State government will ultimately have to cast the vote in the Council and represent the ‘national interest’, interests within a country are very diverse and dependent upon a multitude of factors and actors. Legislative processes in the EU prescribe consultations and that relevant national actors such as the national parliaments are duly informed and part of the discourse. It is therefore submitted that the decision making process even under the unanimity requirement is diverse. Stakeholders can seek out different fora at various levels of government to influence the adoption of a CO2 tax.

Besides the above mentioned barriers to introduce a CO2 tax at EU level, it is also pointed out that the European Commission has made several unsuccessful attempts to legislate in the area of climate change regulation and may therefore be reluctant to invest time in a course of action that may not be embraced by the Member States. While the above would suggest that the prospects for adopting a CO2 tax on EU level are at best a scant possibility in practice, EU law does provide for a course of action. In specific circumstances a group of Member States may be allowed to act upon a legislative proposal of the European Union and undertake measures that would otherwise fall within the ambit of the competences of the Union. The so-called ‘enhanced cooperation’ is a procedure where a minimum of nine EU countries are allowed to establish advanced integration or cooperation without the other EU countries being involved. The coalition of the willing Member States benefits from the EU structures. It is regulated by Article 20 TEU and Articles 326 to 334 TFEU. The procedure can help to overcome the dead-lock of proposals which are blocked by an individual country or a small group of countries not wishing to be part of the initiative.

Support for more environmental taxation may also come from an unexpected direction: the Brexit. Britain’s exit leaves a considerable budget gap at Union level. New income bases need to be identified. The Commissioner for the EU Budget recently proposed the introduction of a plastic tax and a change of the EU ETS. Perhaps a carbon tax could be considered as well.

The working paper on implementation issues and barriers for carbon taxes at EU level is available for download here:

Implementation Issues and Barriers at Member State level

The experience of the front-runner EU countries of the carbon tax (Denmark, Finland and Sweden), focusing on the question which barriers to introducing the CO2 taxes had to be overcome and how they were surmounted.

There have been important barriers and success factors which enabled the introduction of the CO2 taxes in the case study countries. Similar impediments were at play in all three Member States, relating to recycling, competitiveness and the fostering of support. ‘Issue linking’ to strike a balance between different interests has been of paramount importance in all countries. Recycling money back to industry can improve companies' competitive positions and hence appease them and foster political support or at least lead to less resistance.

The experience of the case study countries shows that the introduction of the CO2 taxes was possible by employing a consensus approach. In all countries the political resilience of the CO2 taxes was ensured by frequent adaptations of either the CO2 tax or its wider framework, the environmental tax reform. The consensus approach underlines the importance of recycling in the policy design and the need to safeguard competitiveness. Both issues are tightly related as they can be used to keep stakeholders happy – though this should not go as far as to significantly reduce the environmental impact of the measure, as was the case in Norway. In the case study countries households received inter alia income tax reductions but were bearing a bigger share of the tax burden while companies were at least in part able to receive tax exemptions or tax refunds. Notably in Denmark cross-subsidisation between households and companies was avoided. This is also a successful approach that has been followed by Switzerland, which recycles CO2 tax proceeds back to residents via reductions in the health care insurance premium. In the examined countries companies also benefited from energy efficiency schemes that were designed to help them to reduce production costs. Finland is a special case in this regard as for long it did not have such derogations and the Finnish CO2 tax did also not benefit from flanking support of an environmental tax reform that could offer additional possibilities to support stakeholders. Perhaps this is why the Finnish tax was started relatively low and only increased as provisions favouring industry (e.g. in the energy domain) were extended.

It appears that industry was strongly considered and regarded as an important stakeholder while households were playing a lesser role. Perhaps this can be explained by pointing towards collective action problems that hinder households to undertake action or the acceptance of the environmental goals as a policy justification.

The working paper on implementation issues and barriers for carbon taxes at Member State level is available for download here:

Last update: 28 February 2018