Theory and Impact
Critical Issues in Environmental Taxation series
Edited by Larry Kreiser, Soocheol Lee, Kazuhiro Ueta, Janet E. Milne and Hope Ashiabor
Chapter 4: Inherent logic of EU energy taxes: toward a balance between market protection and environment protection
The road transport sector is excluded from the EU’s Emission Trading System (hereinafter, ETS) due to the difficulties of measuring the CO2 emissions associated with it. Energy taxes could play a complementary role to ETS in that sector to achieve the EU’s CO2 reduction targets. However, currently, many EU Member States have used different energy taxes on the road transport sector, mainly for revenue-raising purposes. This situation is largely the result of the fact that these taxes must conform to the internal logic of the EU Energy Tax Directive (hereinafter, ETD), which harmonized energy taxation of electricity and energy products used as motor fuels or as heating fuels in the EU. This implies that the underlying purpose of these harmonized taxes is to tax all energy products regardless of their environmental performance. Consequently, it can be stated that the real inherent logic of harmonized energy taxes in the EU, and, thus, their real objective, is not the protection of the environment, but to ensure the proper functioning of the internal market. Among EU Member States, this situation has prevented a true transition from a general energy taxation system, focused on revenue collection, to a truly environmental energy taxation system based on the carbon content of each energy product.
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