The ‘Green Paper on market-based instruments for environment and energy related policy purposes’ aims to modify the existing Energy Taxation Directive (adopted in 2003) to support the Commission’s recent energy and environmental objectives (also known as the ‘energy package’ from February 2007). Its main instruments are taxations, emissions trading rights and, to a lesser extent, targeted subsidies. The working areas will be energy use, transport, water management, waste management, biodiversity and air quality.

Dimas said: “Market-based instruments such as emissions trading, environmental taxes and targeted subsidies harness the power of market forces to protect the environment. This more flexible and cost-effective approach has proved its value but it is still underutilized.”

Kovács, who is responsible for Taxation and Customs Union said: “Taxation should in the first place discourage what is undesirable and rewarding at the same time all sorts of positive behaviour, being it energy savings or environment-friendly activities. Tax revenues can then be used to favour economy-friendly activities, such as innovation or jobs.”

The Green Paper concludes: ‘Europe implies nothing less than a new industrial revolution over the next 10 to 15 years. It will require a substantial change in the way Europe deals with energy with the final aim of achieving a real low carbon economy. Several policy areas - at the national as well at the European level - will have to contribute and to be adapted in order to lead to this ambitious objective.’

The Commission intends to take the reactions on the Green Paper for the upcoming review of the Energy Taxation Directive. Replies to the consultation should be sent to mailto:Green-paper-mbi@ec.europa.eu before July 31st, 2007.

Further information:

Website EC taxation and customs

Webiste EC environment

Download Greenpaper in pdf