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REPORT     
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30 March 1999
PE 229.724/fin. A4-0171/99
on the proposal for a Council Directive (EC) on Restructuring the Community Framework for the Taxation of Energy Products (COM(97)0030 - C4-0155/97 - 97/0111(CNS))
Draftsmen of opinions:
Mrs María Teresa Estevan Bolea, Committee on Research, Technological Development and Energy ("HUGHES" Procedure)
Mr Tom Spencer, Committee on the Environment, Public Health and Consumer Protection ("HUGHES" Procedure)
Committee on Economic and Monetary Affairs and Industrial Policy
Rapporteur: Patrick Cox
By letter of 8 April 1997 the Council consulted Parliament, pursuant to Article 99 of the EC Treaty, on the proposal for a Council Directive (EC) on Restructuring the Community Framework for the Taxation of Energy Products.
 A LEGISLATIVE PROPOSAL DRAFT LEGISLATIVE RESOLUTION
 B EXPLANATORY STATEMENT
 OPINION
 OPINION

 By letter of 8 April 1997 the Council consulted Parliament, pursuant to Article 99 of the EC Treaty, on the proposal for a Council Directive (EC) on Restructuring the Community Framework for the Taxation of Energy Products.

At the sitting of 9 April 1997 the President of Parliament announced that he had referred this proposal to the Committee on Economic and Monetary Affairs and Industrial Policy as the committee responsible and the Committee on Research, Technological Development and Energy, the Committee on the Environment, Public Health and Consumer Protection and the Committee on Transport and Tourism for their opinions.

At its meeting of 18 June 1997 the Committee on Economic and Monetary Affairs and Industrial Policy appointed Mr Cox rapporteur.

At the sitting of 13 June 1997 the President announced that this report would be drawn up in accordance with the Hughes Procedure by the Committee on Economic and Monetary Affairs and Industrial Policy in conjunction with the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection.

The Committee on Economic and Monetary Affairs and Industrial Policy considered the Commission proposal and the draft report at its meetings of 2 December 1997, 21 January, 24 June, 22 September 1998 and 19-20 January 1999.

At the last meeting it adopted the draft legislative resolution by 23 votes to 17, with 6 abstentions.

The following were present for the vote: von Wogau, chairman; Katiforis and Secchi, vice-chairmen; Cox, rapporteur; Areitio Toledo, Argyros (for Arroni), Barton (for Berès), Breyer (for SoltwedelSchäfer pursuant to Rule 138(2)), Carlsson, Cars (for Riis-Jørgensen), Ettl (for Billingham), Fayot, Friedrich, Gallagher, García Arias, García-Margallo y Marfil, Gasòliba I Böhm, Glase (for de Brémond d'Ars), Harrison, Hautala, Hendrick, Herman, Hoppenstedt, Ilaskivi, Kestelijn-Sierens, Konrad, Langen, Larive, Lulling, Erika Mann (for Carrozzo), Thomas Mann (for Christodoulou), Metten, Miller, Murphy, Paasilinna, Peijs, Pérez Royo, Peter (for Caudron), Porto (for Fourçans), Randzio-Plath, Read, Ribeiro, Rübig, Svensson, Thyssen and Watson.

The opinions of the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection are attached; the Committee on Transport and Tourism decided on 23 September 1997 not to deliver an opinion.

The report was tabled on 20 January 1999 (A4-0015/99).

At the sitting of 9 February 1999 the matter was referred back to committee, pursuant to Rule 59(3) of the Rules of Procedure.

The committee confirmed the appointment of Mr Patrick Cox as rapporteur at its meeting of 17 February 1999.

It considered the draft second report at its meetings of 30 March 1999.

At the last meeting it adopted the draft legislative resolution by 28 votes to 18.

The following were present for the vote: von Wogau, chairman; Katiforis, Garosci and Secchi, vicechairmen; Goedbloed (and for Cox, rapporteur); Arroni, Barton (for Corrozzo), Berès, Billingham, Camisón Asensio (for Areitio Toledo), Carlsson, Cassidy (for de Brémond d'Ars), Caudron, Donnelly, Fayot, Fourçans, Friedrich, García-Margallo y Marfil, Harrison, Hendrick, Herman, Ilaskivi, Jarzembowski (for Hoppenstedt), Kestelijn-Sierens, Konrad, Langen, de Lassus (for Castagnède), Malerba (for Lulling), Metten, Miller, Murphy, Paasilinna, Peijs, Pérez Royo, Peter (for Glante), Pomés Ruiz (for Mezzaroma), Randzio-Plath, Rapkay, Read, Ribeiro, Tappin (for Kuckelkorn), Theonas (for Svensson), Thyssen, Torres Marques, Watson, Wibe and Wolf (for Hautala).

The opinions of the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection are attached.

The second report was tabled on 30 March 1999.

The deadline for tabling amendments will be indicated in the draft agenda for the relevant partsession.


 A LEGISLATIVE PROPOSAL DRAFT LEGISLATIVE RESOLUTION

Proposal for a Council Directive (EC) on Restructuring the Community Framework for the Taxation of Energy Products (COM(97)0030 - C4-0155/97 - 97/0111(CNS))

The proposal is approved with the following amendments:

Text proposed by the Commission(1)

Amendments by Parliament

(Amendment 1)
Recital 2a (new)

Whereas the long-term objective should be a Europe-wide ecological tax reform which taxes the consumption of natural resources and impairment of the environment while removing the burden of taxation from efforts to achieve sustainable development; whereas the main requirement for a genuine change of direction is a tax on CO2 emissions;

(Amendment 2)
Recital 5

Whereas, as a party to the United Nations Framework Convention on Climate Change, the European Union has undertaken to take the measures required to stabilise greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous interference with the climate system;

Whereas, as a party to the United Nations Framework Convention on Climate Change, the European Union has undertaken to take the measures required to stabilise and in time to reduce greenhouse gas concentrations in the atmosphere to a level that will prevent dangerous interference with the climate system;

(Amendment 3)
Recital 6

Whereas the taxation of energy products is one of the instruments available for achieving these objectives;

Whereas the taxation of energy products is one of the key instruments available for achieving these objectives;

(Amendment 4)
Recital 21

Whereas the minimum levels of taxation must reflect the competitive position of the different energy products ;

Whereas the minimum levels of taxation must reflect not only the competitive position but also the environmental and public health effects of the different energy products;

(Amendment 5)
Recital 23a (new)

Whereas, pending the adoption by the Council of common rules on a carbon dioxide/energy tax, Member States should be encouraged to apply other parameters, notably carbon content, to their national systems of energy taxation without the consequent differences in fiscal treatment being in breach of the rules of the single market;

(Amendment 6)
Recital 24

Whereas the minimum levels of taxation applicable to energy products other than mineral oils must be increased gradually;

Whereas the minimum levels of taxation applicable to energy products other than renewable sources of energy must be increased constantly in real terms;

(Amendment 7)
Recital 25

Whereas it is necessary, in order to prevent a loss of value in Community minimum levels, to draw up a schedule of biennial increases in these minimum levels and to provide for the Council, not later than 1 January 2001, to lay down new levels for a further period;

Deleted

(Amendment 8)
Recital 27

Whereas Member States should be permitted to apply, if they so wish, certain other exemptions or reduced levels of taxation below the Community minimum levels within their territory, where that would not be detrimental to the proper functioning of the internal market and would not result in any distortions of competition;

Whereas Member States should be permitted to apply, if they so wish, certain other exemptions or reduced levels of taxation below the Community minimum levels within their territory, where that would not be detrimental to the proper functioning of the single market or where it would enhance environmental, public health or other benefits;

(Amendment 9)
Recital 29

Whereas, in particular, in order to promote the use of alternative energy sources, renewable forms of energy must be able to enjoy preferential treatment;

Whereas, in particular, in order to promote a cleaner, more sustainable environment, renewable forms of energy must be exempted from the scope of this Directive;

(Amendment 10)
Recital 29a (new)

Whereas the European Community and its individual Member States are bound by international agreements to exempt energy products for use in commercial aviation from taxation on fuel; whereas, however, this exemption is not consistent with a fiscal policy which taxes the consumption of natural resources and impairment of the environment; whereas the Commission and the Member States will seek an abolition of the exemption in future international agreements; whereas, in order to reduce emissions of CO2 from commercial aviation, which is the most rapidly growing sector, and to push for the development of low-consumption aircraft, the Commission will submit, no later than 1 June 1999, appropriate proposals as an alternative to taxation on fuels;

(Amendment 11)
Recital 32

Whereas Member States should be authorised to grant tax refunds to firms incurring investment expenditure aimed at improving energy efficiency and those whose energy costs represent a substantial proportion of the value of their sales;

Whereas Member States should be authorised to grant tax refunds to firms incurring investment or amortisation expenditure aimed at improving energy efficiency and reducing emissions that damage the environment and public health and those whose energy costs represent a substantial proportion of the value of their sales;

(Amendment 12)
Recital 35a (new)

Whereas the general provisions set out in Directive 92/12/EEC will continue to apply,

(Amendment 13)
Article 2(2)

2. This Directive shall also apply to:

2. For the purposes of this Directive, "electricity and heat" shall mean electricity falling within CN code 2716 and heat resulting from industrial processes which are not taxed under this Directive and which is offered for sale for heating purposes.

(a) electricity falling within CN code 2716

(b) heat generated during the production of electricity.

(Amendment 14)
Article 2a (new)

Article 2aBy way of exemption from Article 2, this Directive shall not apply to:

(a) energy products referred to in Article 2 under fiscal control for the purposes of pilot projects for the technological development of more environmentfriendly products or to develop energy products from renewable sources;

(b) products falling within CN codes 2207 20 00 and 2905 11 00;

(c) all products referred to in Article 2 which are produced from renewable resources, including hydro-electricity and electricity of solar, wind, tidal or geothermal origin and alcohol from agricultural raw materials;

(d) electricity generated from hydrogenbased or other fuel cells and gas from biomass or waste origin;

(e) heat generated during the production of electricity.

(Amendment 15)
Article 4(2)

2. Taxable energy products other than those for which a minimum level of taxation is specified in this Directive shall be subject to taxation, according to use, at a level which is not below the minimum level applicable to the equivalent heating fuel or motor fuel.

2. Taxable energy products listed in Article 2 and not exempt under Article 2a other than those for which a minimum level of taxation is specified in this Directive shall be subject to taxation, according to use, at a level which is not below the minimum level applicable to the equivalent heating fuel or motor fuel.

(Amendment 16)
Article 5(1a) (new)

1a. Pending the adoption by the Council of common rules for the purposes of the policy objectives referred to in this paragraph, Member States which apply higher rates of tax, either in proportion to the carbon content of fuels in order to abate greenhouse gas emissions, or for reasons of public health policy, shall not be in infringement of the rules of the Single Market.

(Amendment 17)
Article 5(2)

2. When, for environmental and/or health policy reasons, different standards are established at a Community level for products referred to in this Directive, Member States wishing to apply differential rates of taxation to a product according to the quality of that product shall incorporate criteria established at Community level.

2. When, for environmental and/or public health policy reasons, different standards are established at a Community level for the products referred to in Article 2 and not exempt under Article 2a, Member States shall apply differential rates of taxation to the products concerned according to the criteria established at Community level.

(Amendment 18)
Article 6

As from 1 January 1998, the minimum levels of taxation applicable to motor fuels shall be fixed as follows:

As from 1 January 2000, the minimum levels of taxation applicable to motor fuels shall be fixed as follows:

- for petrol: ECU 417 per 1 000 litres at a temperature of 15 °C. Moreover, Member States shall apply to leaded petrol a rate of taxation above that charged on unleaded petrol,

- for petrol: EURO 450 per 1 000 litres at a temperature of 15 °C. Moreover, Member States shall apply to leaded petrol a rate of taxation above that charged on unleaded petrol,

- for gas oil: ECU 310 per 1 000 litres at a temperature of 15 °C,

- for gas oil: EURO 343 per 1 000 litres at a temperature of 15 °C,

- for kerosene: ECU 310 per 1 000 litres at a temperature of 15 °C,

- for kerosene: EURO 343 per 1 000 litres at a temperature of 15 °C,

- for liquid petroleum gas: ECU 141 per 1 000 kg,

- for liquid petroleum gas: EURO 174 per 1 000 kg,

- for natural gas: ECU 2,9 per gigajoule.

- for natural gas: EURO 3,5 per gigajoule.

(Amendment 19)
Article 7(1) indents

- for gas oil: ECU 32 per 1 000 litres at a temperature of 15 °C,

- for gas oil: EURO 37 per 1 000 litres at a temperature of 15 °C,

- for kerosene: ECU 30 per 1 000 litres at a temperature of 15 °C,

- for kerosene: EURO 35 per 1 000 litres at a temperature of 15 °C,

- for liquid petroleum gas: ECU 41 per 1 000 kg,

- for liquid petroleum gas: EURO 48 per 1 000 kg,

- for natural gas: ECU 0,3 per gigajoule.

- for natural gas: EURO 0,6 per gigajoule.

(Amendment 20)
Article 8

As from 1 January 1998, the minimum levels of taxation applicable to heating fuels shall be fixed as follows:

As from 1 January 2000, the minimum levels of taxation applicable to heating fuels shall be fixed as follows:

- for gas oil: ECU 21 per 1 000 litres at a temperature of 15 °C,

- for gas oil: EURO 23 per 1 000 litres at a temperature of 15 °C,

- for heavy fuel oil falling within CN code 2710 00 74: ECU 18 per 1 000 kg,

- for heavy fuel oil falling within CN code 2710 00 74: EURO 23 per 1 000 kg,

- for other heavy fuel oil falling within CN code 2710: ECU 22 per 1 000 kg,

- for other heavy fuel oil falling within CN code 2710: EURO 28 per 1 000 kg,

- for kerosene: ECU 7 per 1 000 litres at a temperature of 15 °C,

- for kerosene: EURO 16 per 1 000 litres at a temperature of 15 °C,

- for liquid petroleum gas: ECU 10 per 1 000 kg,

- for liquid petroleum gas: EURO 22 per 1 000 kg,

- for natural gas: ECU 0,2 per gigajoule,

- for natural gas: EURO 0,45 per gigajoule,

- for solid energy products: ECU 0,2 per gigajoule.

- for solid energy products: EURO 0,45 per gigajoule.

(Amendment 21)
Article 9

As from 1 January 1998, the minimum level of taxation on electricity and heat generated during its production shall be fixed at ECU 1 per megawatt hour.

Without prejudice to the exemptions referred to in Article 2a, as from 1 January 2000, the minimum level of taxation on electricity and heat shall be fixed at EURO 2 per megawatt hour. The Member States shall apply a supplementary tax based on the carbon content of the fuels used for the production of electricity.

(Amendment 22)
Article 10(1) and (2) 1st subparagraph

1. The minimum levels of taxation laid down in this Directive shall be amended on 1 January 2000, to the amounts shown in Annex I.

1. The minimum levels of taxation laid down for the products listed in Article 2(1) of this Directive and not exempted under Article 2a shall be indexed to increase automatically on the first day of January each year following the implementation of this Directive. The index shall be the latest available figure for the annual rate of inflation for the EU as a whole plus 2 percentage points. After 5 years, the Council, acting unanimously, after consulting the European Parliament, on the basis of a report and a proposal from the Commission, shall review the system of the taxation of energy products and shall adopt such measures as may be appropriate to improve the functioning of the system.

2. Not later than 1 January 2001, the Council, acting unanimously after consulting the European Parliament, shall fix, on the basis of a report and a proposal from the Commission, the minimum levels of taxation for a further period beginning on 1 January 2002 and shall adopt such other measures as may be appropriate to improve the functioning of the system of taxation of energy products. Until the Council adopts new levels of taxation on the basis of the Commission report and proposal, Member States shall treat the amounts shown In Annex I as target levels of taxation from 2002.

2. Until the Council adopts a new system, on the basis of the Commission report and proposal, the indexation formula laid down in paragraph 1 shall continue on an annual basis. In this calculation, the Commission shall give special priority to the achievement of Member States" climate change commitments.

(Amendment 23)
Article 12

1. The value of the ecu in national currencies to be applied to the value of the levels of taxation shall be fixed once a year. The rates to be applied shall be those obtaining on the first working day of October and published in the Official Journal of the European Communities and shall have effect from 1 January of the following calendar year.

1. The value of the euro in national currencies to be applied to the value of the levels of taxation in those Member States not participating in Stage 3 of Economic and Monetary Union shall be fixed once a year. The rates to be applied shall be those obtaining on the first working day of October and published in the Official Journal of the European Communities and shall have effect from 1 January of the following calendar year.

2. Member States may maintain the amounts of taxation in force at the time of the annual adjustment provided for in paragraph 1 if the conversion of the amounts of the level of taxation expressed in ecu would result in an increase of less than 5 % or ECU 5, whichever is the lower amount, in the level of taxation expressed in national currency.

Deleted

(Amendment 24)
Article 13

Article 13

Deleted

1. In addition to the general provisions set out in Directive 92/12/EEC on exempt uses of taxable products, and without prejudice to other Community provisions, Member States shall exempt the following from taxation under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:

(a) energy products used for purposes other than as motor fuels or as heating fuels. For the purposes of this Directive, heating fuels shall not include energy products used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes. Member States shall also exempt electricity used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes;

(b) energy products used to produce electricity and heat generated during its production. However, Member States may, for reasons of environmental policy, subject these products to taxation without having to respect the minimum levels of taxation laid down in this Directive. In such case, the taxation of these products shall not be taken into account for the purpose of satisfying the minimum level of taxation on electricity laid down in Article 9 of this Directive;

(c) energy products supplied for use as fuels for the purpose of air navigation other than private pleasure-flying for as long as such products are obliged to be exempted under international obligations.

For the purposes of this Directive "private pleasure-flying" shall mean the use of an aircraft by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities.

Member States may limit the scope of this exemption to supplies of jet fuel (CN code 2710 00 51);

(d) energy products supplied for use as fuel for the purposes of navigation within Community waters (including fishing), other than private pleasure craft.

For the purposes of this Directive "private pleasure craft" shall mean any craft used by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities.

2. Member States may limit the scope of the exemptions provided for in paragraph 1 (c) and (d) to international and intra-Community transport. In addition, where a Member State has entered into a bilateral agreement with another Member State, it may also waive the exemptions provided for in paragraphs 1 (c) and (d) of this Article. In such cases, Member States may apply a level of taxation below the minimum level set out in this Directive.

(Amendment 25)
Article 14

1. Without prejudice to other Community provisions, Member States may apply total or partial exemptions or reductions in the level of taxation to:

1. In addition to the general provisions set out in Directive 92/12/EEC, and without prejudice to other Community provisions, Member States may apply total or partial exemptions or reductions in the level of taxation to:

(a) energy products used under fiscal control in the field of pilot projects for the technological development of more environmentally-friendly products or in relation to fuels from renewable resources;

Deleted

(b) energy products falling within CN codes 1507 to 1518, 2207 20 00 and 2905 11 00, 4401 and 4402;

Deleted

(c) forms of energy which are of solar, wind, tidal, geothermal origin or from biomass or waste;

Deleted

(d) forms of energy which are of hydraulic origin produced in hydroelectric installations with a capacity of less than 10 MW;

Deleted

(e) heat generated during the production of electricity;

Deleted

(f) energy products used for the carriage of goods and passengers by rail;

(f) energy products used for the carriage of goods and passengers by rail;

(fa) energy products used for local public transport purposes

(g) energy products used for navigation on inland waterways other than in private pleasure craft;

(g) energy products used for navigation on inland waterways other than in private pleasure craft;

(h) natural gas in Member States whose gas market is in the process of actual development for as long as the share of gas in the domestic and industrial market is less than 10 %, and for a period of no more than 10 years after the coming into force of this Directive.

(h) natural gas in Member States whose gas market is in the process of actual development for as long as the share of gas in the domestic and industrial market is less than 10 %, and for a period of no more than 10 years after the coming into force of this Directive;

(ha) bio-gas obtained by organic recycling of animal residues;

(hb) energy products supplied for use as fuel for the purposes of navigation within Community waters (including fishing);

(hc) fuel additives sold in packages containing not more than 1 litre and intended for use by the final consumer.

2. Member States shall be free to give effect to the exemptions or reductions in the level of taxation mentioned in this Article by refunding all or part of the amount of taxation paid.

2. Member States shall be free to give effect to the exemptions or reductions in the level of taxation mentioned in this Article by exempting or refunding all or part of the amount of taxation paid.

3. The Commission shall report to the Council on the fiscal, economic, agricultural, energy, industrial and environmental aspects of the exemptions or reductions granted in accordance with Article 14 (1) (b) before 1 January 2001 and will make proposals as to whether they should be abolished, modified or extended.

3. Member States may be authorised, for a specific period, to refund all or part of the tax paid by individual firms where the firms are able to demonstrate that the tax burden is leading to a serious competitive handicap.

(Amendment 26)
Article 15

Article 15

Deleted

1. Member States may refund all or part of the amount of tax paid in relation to investment expenditure incurred by a firm in improving the efficient use of energy up to a limit of 50 % of eligible expenditure incurred.

2. Member States may refund some or all of the amount of tax paid by a firm on any part of its non-transport-related energy costs which exceeds 10 % of its total production costs.

However, when the part of non-transport-related energy costs of a firm exceeds 20 % of its total production costs, Member States shall reimburse the whole of the tax paid by the firm on the part of its non-transport-related energy costs which exceeds 10 % of its total production costs.

The net amount of tax paid by a firm following the refunds provided for in the two preceding subparagraphs shall not be less than 1 % of the value of its sales.

3. Member States may also refund to the producer some or all of the amount of tax paid by the consumer on electricity and heat generated during its production in the case of electricity produced from products specified in Article 14 paragraphs 1 (b), (c) and (d).

Legislative resolution embodying Parliament's opinion on the proposal for a Council Directive on Restructuring the Community Framework for the Taxation of Energy Products (COM(97)0030 - C4-0155/97 - 97/0111(CNS))

(Consultation procedure)

The European Parliament,

- having regard to the Commission proposal to the Council, COM(97)0030 - 97/0111(CNS)(2),

- having been consulted by the Council pursuant to Article 99 of the EC Treaty (C4-0155/97),

- having regard to Rule 58 of its Rules of Procedure,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection (A4-0015/99),

- having regard to the second report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection (A4-0171/99),

1. Approves the Commission proposal, subject to Parliament's amendments;

2. Calls on the Commission to alter its proposal accordingly, pursuant to Article 189a(2) of the EC Treaty;

3. Calls on the Council to notify Parliament should it intend to depart from the text approved by Parliament;

4. Calls for the conciliation procedure to be opened should the Council intend to depart from the text approved by Parliament;

5. Asks to be consulted again should the Council intend to make substantial modifications to the Commission proposal;

6. Instructs its President to forward this opinion to the Council and Commission.

(1) OJ C139, 06.05.97, pp 14.
(2) OJ C139, 06.05.97, pp 14.


 B EXPLANATORY STATEMENT

The aim of any tax should be that it is simple to understand, easy to collect, predictable and difficult to evade. The proposal from the Commission for the taxation of energy products is difficult to understand, would be difficult to collect (through its complicated exemption system) and would not necessarily be inclusive of those sectors that should be taxed (again because of the exemption system). In this sense, your rapporteur has started from the polluter pays principle. He has radically revised the exemptions system, making it much simpler and including those parts of the proposal which he believes would have a beneficial environmental effect, and should be promoted. In order to assist those firms who may suffer a genuine competitive handicap as a result of the imposition of the tax, he is proposing that Member State to refund all or part of the tax for a specific period, subject to certain criteria and that the Commission should adopt an enabling regulation to this effect. He also began with the idea that there should be some form of "accelerator principle" for the minimum rates, with an automatic indexation, so that once this package has been agreed, it would be removed from political negotiations for 5 years, making it easier for tax authorities and other economic agents to anticipate the evolution of the energy taxation.

Your rapporteur would also be keen to see the recycling, tax neutrality elements of the framework strengthened with a commitment from Member States to reduce the statutory charges on labour. In this way, firms would see their taxes on labour reduced, and the tax collected would be recycled. Again, with this system in place for at least 5 years, firms would be able to plan for the medium term.

It appears that the Council has not been able to see the wood for the trees. It is the hope of your rapporteur that the Committee and Parliament will support him in simplifying this tax. If it decides otherwise, then we should not complain when the framework is too complicated.

24 June 1998


 OPINION

(Rule 147)

for the Committee on Economic and Monetary Affairs and Industrial Policy

on the proposal for a Council Directive restructuring the Community framework

for the taxation of energy products (COM(97)0030 - C4-0155/97 - 97/0111(CNS)) (report by Mr Cox)

Committee on Research, Technological Development and Energy

Draftsman: Mrs María Teresa Estevan Bolea

PROCEDURE

At its meeting of 27 May 1997 the Committee on Research, Technological Development and Energy appointed Mrs Estevan Bolea draftsman.

It considered the draft opinion at its meetings of 3 February and 22-23 June 1998.

At the latter meeting it adopted the following conclusions unanimously.

The following were present for the vote: Scapagnini, chairman; Quisthoudt-Rowohl, vice-chairman; Estevan Bolea, draftsman; Ahern, Bloch von Blottnitz, Camisón Asensio (for Argyros), Chichester, Desama, Ford (for Adam), Haug (for Lange), García Arias (for Denys), Heinisch (for Ferber), Izquierdo Collado (for McAvan), Linkohr, McNally, Malerba, Matikainen-Kallström, Mombaur, Pompidou, Rapkay (for Rothe, pursuant to Rule 138(2)), Stockmann and Tannert.

A. BACKGROUND

I. INTRODUCTION

This new proposal comes in response partly to the requirement to review the minimum rates of excise duty on hydrocarbons laid down in Article 10 of Directive 92/82/EEC, and partly to the Council"s request, following the deadlock in negotiations on the CO2 /energy tax, to put forward new proposals in the field of taxation of energy products.

In June 1992 the Commission proposal to create a new tax on CO2 and energy foundered, as its compulsory nature was unacceptable. At the Essen European Council summit in 1994 the Commission was requested to put forward new proposals for introducing the tax on a voluntary basis, over a transitional period ending in 2000. At the Ecofin Council meeting of 11 March 1996 agreement could not be reached on the Commission"s proposed time limit on the voluntary aspect laid down at Essen, and the Commission was advised to put forward further proposals.

As a result, the proposed Directive has the threefold objective of updating the minimum rates of duty as they currently apply; following the Commission strategy of introducing a new tax on CO2 and energy, applying not only to hydrocarbons but also to other energy sources: coal, natural gas and electricity; and finally and most importantly, redirecting fiscal policy towards fighting unemployment, reducing labour costs and ensuring that fiscal neutrality is achieved.

Energy products used by industry as raw materials, such as natural gas for the production of ammonia and other substances) and in electrolytic and chemical reduction processes are not included in the Directive, and hence not subject to tax.

Various Member States are interested in ways of restructuring and reforming their tax systems along the lines suggested by the Commission, particularly with the aim of tackling unemployment. The Commission thinks it essential for such reform to follow a coordinated approach, since it is clear that Member States will have an increasingly limited margin for manoeuvre at national level within the single market. Consequently the timescale of the proposal is the first practical measure at Community level to provide the Member States with appropriate fiscal instruments to apply policies for the environment and employment.

II. CONTENT OF THE PROPOSAL

The Commission thinks the proposal should be seen as part of a general policy, since it is not introducing a new tax but establishing a Community framework for taxing energy products, making it possible to restructure the national tax systems and fulfil the objectives of employment, environmental, transport and energy policies, while complying with an essential element of the acquis communautaire, the single market.

Article 1(2) states that when implementing the directive, Member States must 'endeavour to avoid

any increase in their overall tax burden". To attain this objective they must 'endeavour, in particular, to reduce at the same time statutory charges on labour".

The products to be taxed are all hydrocarbons: oil and gas and their derivates, coal and electricity.

Article 7 lays down some exemptions, or lower tax rates, applying to motor fuels used in certain industrial and chemical activities and for agricultural purposes.

Similarly, reduced tax rates apply to fuels for heating purposes, as set out in Article 8.

Article 9 refers to electrical energy and states that from 1 January 1998 the minimum level of tax applicable to electricity and to the heat generated during its production will be ECU 1 per megawatt hour.

From 1 January 2000 the minimum tax rates laid down by the directive will be amended and replaced by the rates shown in Annex I.

Articles 13, 14, 15 and 16 govern a range of tax exemptions and rebates with a beneficial effect on renewable energies, gas and activities that are major consumers of energy.

The aim is to establish a flexible framework in the field of energy, transport and environmental policy by taking account of all indirect taxes on a given product, except for VAT. The Member States will be authorized to apply reduced rates or exemptions from tax to certain products and uses (bio-fuels, renewable energies, rail transport, waterway transport, heat produced in co-generation plants and other cases).

Flexibility is also the hallmark of Article 16 of the proposal, in which the Commission proposes allowing the Member States to lay down exceptions to the Community minimum rates when they help to attain specific policy objectives.

In the case of natural gas the Commission proposes that, where the gas market is being developed, Member States will be allowed to apply tax exemptions or rebates over a period of no more than 10 years from the directive"s entry into force. The purpose of this provision, as of those promoting the development of alternative energies, is to strengthen the Union"s security of supply by diversifying its sources of energy.

The tax treatment of gas is acceptable since a large part of natural gas consumption is due to electrical energy generation, so that what is being taxed is electricity, the end product.

Natural gas intended for chemical synthesis is exempt, under Article 13(1)(a), as is gas intended for producing electricity and the heat generated during its production (co-generation), under Article 13(1)(b).

Moreover Article 14(1)(e) repeats the option available to the Member States of applying total or partial tax exemptions in various cases, including heat generated during electricity production, which also covers co-generation and desalination of seawater by thermal processes using combined cycles.

The Commission thinks that the content of the directive could make a positive impression on Member States, businesses and European citizens.

The Committee on Research, Technological Development and Energy considers that its main contribution will be to set up a new source of fiscal revenue, providing the opportunity for the Member States to reduce compulsory taxes on employment and thus help reduce unemployment. It is generally accepted that such an opportunity is at present limited by the Member States" difficulty in finding sufficient and appropriate financial resources to offset the loss of income resulting from the - absolutely essential - reduction in labour costs, lowering the taxation on employment.

It is proposed to review these Community minimum rates over a period of time (1998, 2000 and 2002), with the following objectives:

- in the case of motor fuels, gradual approximation of rates between the various products, chiefly gas oil and petrol;

- in the case of heating fuels and motor fuels used for certain industrial and commercial purposes, taxing products within the proposal"s scope in proportion to their energy value, at the end of a transitional period.

The minimum tax rates for the last stage (2002) are proposed as target rates. Their compulsory nature is to be confirmed in a later report and Commission proposal. In its report the Commission will be giving particular attention to the measures adopted by Member States to prevent an increase in overall fiscal pressure.

Although the responsibility for decision-making rests entirely with the Member States, in accordance with the principle of subsidiarity, the Commission thinks that the proposal"s main advantage will be to enable them to restructure taxation in a way that will benefit employment, since there is insistence on the need to ensure that the end result is reflected in fiscal neutrality.

III. SOCIAL AND ECONOMIC IMPACT OF THE PROPOSED DIRECTIVE

The Commission proposes to revise the Community minimum duties on hydrocarbons laid down by Directive 92/82/EEC (adopted in 1992 and in many cases much lower than the rates applied in the Member States), and to create minimum duties on products other than hydrocarbons. It is setting rates for three categories, as follows:

- energy products used as motor fuel;

- energy products used as motor fuel for certain industrial and commercial purposes (for which the minimum rates are much lower);

- energy products used as heating fuel.

The Commission is also proposing to extend the scope of the tax beyond the hydrocarbons covered by Directive 92/81/EEC so that the following energy sources are also covered, since such products are directly or indirectly substitutes if they are used as heating fuel:

- coal, coke, lignite, bitumens and products derived from them;- natural gas;

- electricity.

The treatment of electricity is a significant innovation. There are two possible ways of bringing electricity within the scope of the taxation arrangements: by taxing the fuels used in its production (an input tax) or by taxing the electricity itself (an output tax).

The Commission is proposing harmonization based on output taxation, that is, not taxing the fuels used to generate electricity but the electricity produced, because

- this is the only method by which the general indirect taxation principle of applying tax in the country of consumption can be uniformly achieved;

- electricity can be traded within and between countries without having been taxed, thus avoiding double taxation in the country of consumption;

- Member States can differentiate between electricity used by final consumers and industry, and thus apply differential taxes (this is the practice in nearly all Member States that currently tax electricity);

- it is the only means by which the tax burden on energy-intensive industry can be reduced.

Article 13 gives details of exemptions, and paragraph 1(b) deals with the important issue of electricity.

In the European Union 71% of coal is used to generate electricity and about 14.4% in the iron and steel industry for chemical reduction, which means that about 85% of coal would be exempt from the new taxes.

In order to avoid - or at least minimize - harming the competitiveness of European businesses in relation to third countries, the Commission proposes that

- for firms whose energy costs are between 10 and 20% of production costs, Member States may refund some or all of the tax paid by a firm on the proportion of their energy costs in excess of 10% of its total production costs;

- for firms whose energy costs are higher than 20% of production costs, Member States are required to refund all the tax paid on the proportion of their energy costs in excess of 10% of their total production costs.

Attention should be drawn to the widespread and total opposition - without exception - of European and national industry, transport firms and business associations to the content of the proposed directive. It is being interpreted as a new tax and they do not agree or believe that it can have a fiscally neutral result.

However, if the numerous exemptions, reductions and tax rebates are analysed in detail, this concern is perhaps rather unjustified.

The Commission has assessed the economic impact of the proposal using the Hermes, GEM-E3 and E3ME models, which posit different scenarios. The results of these assessments show the impact per country and economic sector, and it concludes that:

(a) from a macroeconomic point of view the impact is minimal and practically undetectable in relation to the normal variations in the course of an economic cycle;

(b) in macroeconomic terms, benefits are perceived if the revenue from the increase in taxation is used to reduce social security contributions paid by employers;

(c) economic projections based on this tax increase in relation to the present tax rates on energy suggest that:

- Community GDP would increase by between 0.02 and 0.20%;- between 155 000 and 457 000 jobs could be created;

- CO2 emissions would drop by between 0.5 and 1.6%, and emissions of SO2, NOx and particulates and other pollutants would also fall;

(d) the structural change required is relatively slight and will not involve an unacceptable sacrifice for any country or industrial sector;

(e) the impact on inflation through the rise in prices appears to be negligible.

B. CONCLUSIONS

1. The Committee on Research, Technological Development and Energy shares with all sectors of economic activity a concern at and indeed opposition to the introduction of new taxes on energy or other products, or increasing the present ones.

2. It considers, further, that the establishment of a Community framework for the taxation of energy products, with the Member States having the opportunity to act in a flexible manner in their application of indirect taxes, provides an appropriate escape route from the dilemma into which the failure of the CO2 energy tax has led Community policies, the requisite supplement to the liberalization of the internal energy market and a necessary response to the undertakings given in Kyoto.

3. At the same time, it points out that job creation is top priority in EU social and economic policy. This objective will not be achieved unless effective measures are adopted to fight unemployment. It emphasizes that it regards an ecologically-based tax reform as the only promising possibility of combating unemployment in the European Union on a sustainable basis; in this connection, it regards the framework proposed by the Commission for the taxation of energy as an important initial step in the right direction.

4. It also points out that the main demands of business people, and particularly of small businesses, is to reduce non-wage labour costs, in other words the social security charges that impose a burden on employment. The reduction in labour costs through a compensatory increase in the tax yield from energy consumption is a significant step forward in employment policy and therefore represents a trend of unusual importance on the road towards a comprehensive ecologically-based tax reform.

5. In accordance with the points made in Conclusions 3 and 4 above, it shares the Commission"s criteria informing the proposed Directive, inasmuch as the numerous exemptions and tax rebates it includes will ensure the protection of certain activities that are heavy consumers of energy, renewable energies, co-generation, pilot projects for technological development, almost all national coal production, energy savings, rail transport, natural gas and its emerging markets, agricultural energy-consuming activities and other things. Moreover, taxation partly determines the price of energy and this is an incentive to optimize energy consumption, increasing energy efficiency and improving the emission of pollutants into the air and water and reducing the generation of waste, with clearly positive effects for protection of the environment.

6. It also shares the general aim of preventing any action that will mean a loss of competitiveness for industry and services in the Community and accordingly calls on the Commission to ensure that implementation of the directive does not result in an overall increase in the tax burden and that non-wage labour costs, i.e. social security charges which adversely affect employment, are reduced for undertakings, especially small businesses.

7. It calls on the Commission to keep a close watch to ensure that the principle of fiscal neutrality is complied with, by which increases in the tax yield from the introduction of this Directive must be offset by a reduction in the social security costs of labour borne by employers.

8. It welcomes the wording of Article 14, governing the exemption of renewable energies from taxation.

9. It calls on the Commission to look into the possibility of including the carriage of goods by road in the exemptions under Article 13, either through a reduced price for motor gas oil or by means of tax rebates.

10. It calls on the Commission to make further efforts seeking the achievement of a major, ecologically-based tax reform in the European Union. It also calls on the Commission to encourage energy-saving measures as one of the most effective ways of protecting the environment.

11. It calls on the Commission to urge the EIB to open a special credit line for small businesses, to finance facilities and equipment to improve energy efficiency in industrial and service activities.

12. The Committee on Research, Technological Development and Energy welcomes the proposed directive as a strategy for the harmonization of the taxation of energy products and for the simultaneous reduction of emissions of CO2 and other gases, an increase in the number of jobs available and growth in Gross Domestic Product in the European Union.

13. The committee regards the taxation of energy as the only possibility for the European Union and its Member States to attain the binding targets set for the reduction of emissions of CO2.

14. It harbours serious doubts as to the feasibility of compliance with the timetable laid down, despite the urgent nature of the issue, and therefore proposes a commensurate postponement.

15. Finally, the Committee on Research, Technological Development and Energy calls on the Committee on Economic and Monetary Affairs and Industrial Policy to incorporate the following amendments in its report:

Text proposed by the Commission

Amendments by Parliament

(Amendment 1)
Article 13(1)(a)

(a) energy products used for purposes other than as motor fuels or as heating fuels. For the purposes of this Directive, heating fuels shall not include energy products used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes. Member States shall also exempt electricity used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes;

(a) energy products used for purposes other than as motor fuels or as heating fuels. For the purposes of this Directive, heating fuels shall not include energy products used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes, and in organic, petrochemical and carbochemical synthesis. Member States shall also exempt electricity used principally for the purposes of chemical reduction, and in metallurgical and electrolytic processes;

(Amendment 2)
Article 14(1)(e)

(e) heat generated during the production of electricity;

(e) heat generated during the production of electricity, especially in co-generation and in combined cycles for desalination of sea water;

(Amendment 3)
Article 14(1)(ha) (new)

(ha) bio-gas obtained by organic recycling of animal residues.

7 January 1999

 OPINION

(Rule 147)

for the Committee on Economic and Monetary Affairs and Industrial Policy

on the proposal for a Council Directive on restructuring the Community framework for the taxation of energy products (COM(97)0030 - C4-0155/97 - 97/0111 (CNS)) (report by Mr Patrick Cox)

Committee on the Environment, Public Health and Consumer Protection

Draftsman: Mr Tom Spencer

PROCEDURE

At its meeting of 16 April 1997 the Committee on the Environment, Public Health and Consumer Protection appointed Mr Tom Spencer draftsman.

It considered the draft opinion at its meeting of 27 November 1997, 5 January and 8 December 1998.

At the latter meeting it adopted the following conclusions unanimously.

The following took part in the vote: Collins, Dybkjaer, vice-chairman, Spencer, draftsman; Blokland, Bowe, Breyer, Cabrol, Eisma, Estevan Volea (deputizing for Mr Burtone), Flemming, Gonzalez Alvarez, Graenitz, Kuhn, Marinucci, Pollack, Schleicher, Schnellhardt, Valverde Lopez, Virgin, White.

BACKGROUND/GENERAL COMMENTS

In 1997 the Commission adopted a proposal for a directive restructuring the Community framework for the taxation of energy products (the so-called "Monti" proposal). The avowed aim is to modernize the Community system for the taxation of mineral oils and extend its scope to all energy products. Improving the functioning of the internal market is the key element although the Commission, in the Explanatory Memorandum preceding the proposal for a directive, speaks of "a single market framework enabling a revenue neutral structuring of tax systems to sustain employment and environment".

The "Monti" proposal and climate change

Despite the language of the preambles, it is quite clear that the Commission's proposal for a directive on the taxation of energy products is little motivated by the intention of protecting the environment and is even anti-environmental in certain details. It is certainly no replacement for the Commission's earlier proposals for a carbon dioxide/energy tax. Parliament should insist that this latter be kept on the table, before the Council, until revitalised ahead of COP 6.

The 'Taxation of Energy Products' as a "brown" proposal

As the proposal was inspired by the inadequacies of the fiscal harmonization of energy products in single market terms, it should come as no surprise that its content is more "brown" than "green". In particular, there is no attempt whatsoever in the draft directive to differentiate between those energy sources which are relatively or totally climate-safe and those which are climate-harmful, although it does allow Member States to do so.

There is no attempt to vary the incidence of the minimum rate according to carbon content, although the Commission would no doubt argue in its defence that this could create financial distortions and would also be politically doomed in the Council. This is, however, in contrast to the Council's previous position.

Before the Committee on the Environment, Public Health and Consumer Protection can begin to consider its response to the "Monti" proposals, technical clarification needs to be provided on a number of points.

While we can acknowledge that the proposals leave it to Member States to green their fiscal systems, what protection, if any, do the proposals provide for those "green" Member States to defend environmentally progresssive fiscal practices against legal challenges and accusations of fiscal distortion or discrimination from "brown" Member States ?

The implication and the logic behind the proposals is that the common minimum rate will apply equally to electricity and heat generated by solar, wind or combined heat and power and to that generated by coal. Parliament needs to address the question of whether this is the right political message for the EU to be sending out post-Buenos Aires, regardless of whether such a situation will still be legally acceptable after the Kyoto Protocol enters into force.

How to green the "Monti" proposal

Amendments to the Commission's proposal should seek to achieve the following five objectives :

1. Restoring the balance between environmental and fiscal purposes

Essentially, this involves two elements : changing the legal base not just to include a reference to Article 130r as it is in the Commission's preamble, but to put Article 130s as the joint legal base with Article 99. The second element is to "green" the language of the preamble, which sets out in legal terms the justification of the legal text that follows in the individual articles.

2. Retaining the dormant CO2/energy tax for future revitalisation :

As pointed out above, the present Commission proposal is no replacement for the CO2/energy tax proposal that lies dormant in the Council. As the committee has opted not to try and convert the present proposal into a CO2/energy tax, we will need to maintain the option of revitalising the CO2/energy tax proposals once the Kyoto follow-up is clear. Ideally, that should be done explicitly in the Monti text itself.

3. Exempting renewables and encouraging fuel switching :

While the Monti proposal is not a replacement for the CO2/energy tax, it can nonetheless be converted into an effective vehicle in which to carry the climate change message to industry and the markets. This could be done, inter alia, by exempting renewables, such as biofuels (including wood and charcoal), solar and wind, and the other energy sources referred to in Article 14 obligatorily from the scope of Article 2 so compelling Member States to be responsible environmentally. To those who complain that this is an area that should be left to national governments on the grounds of subsidiarity the most decisive answer is that climate change is, par excellence, an issue that meets the subsidiarity test for Community competence contained in the second paragraph of Article 3b of the Treaty. In addition it will not become law unless all Member States agree to it.

4. Indexing

While exempting renewables creates a fiscal differential between them and fossil fuels and thus encourages fuel switching, it is a static and thus "one off" incentive. To make it dynamic and long lasting, the gap needs to continue to widen. That is the purpose of the indexing mechanism in Article 10.

However, fuel switching is especially decisive in combatting climate change in the context of the investment decisions of the electricity industry. UK experience since 1992 indicates that dramatic results in terms of greenhouse gas emissions can be achieved very rapidly once electricity generators so decide. Those decisions are ultimately made on price. If, as a result of this proposal, they perceive fossil fuel prices as going up, and the price of renewables either as not rising or not rising as fast as fossil fuels, they will switch. But they have to perceive that message in the market. They will only do this if they have to pay the tax on their fossil fuel inputs, which is why we have to disagree with the Commission and have to amend Article 8 so that the purchase and consumption of fossil fuels by electricity generators is a taxable event.

5. Green is good ; brown is bad

Finally, there is the question of encouraging environment-friendly behaviour ("green") and discouraging environment-unfriendly behaviour ("brown"). The Commission text is very contradictory in this regard. On the one hand it contains a degree of environment-friendly, "green", language, apparently permissive of Member States encouraging "green" and discouraging "brown" behaviour. On the other it stresses that the proper functioning of the internal market is paramount and that "appreciable differences" in national taxation are "detrimental" to this. In the absence of any harmonised legislation on where to draw this particular line in the sand, it will inevitably be left to the Court to resolve.

As the Court's jurisprudence demonstrates, for instance in its various rulings on the tax treatment of alcohol in the early 1980s, in the absence of European fiscal legislation, the Court does not permit Member States free reign over their national tax policies where this can affect free movement. That is why it is essential for this legislation not merely to advocate national flexibility beyond the minimum requirements, but also to provide legal immunity for Member States which wish to practice it.

Striking the fiscal balance between environmental objectives and Single Market objectives, where these conflict, should be a political decision, not a judicial one. Given the unanimity rule on fiscal policy, failure to address this issue in this legislation can only lead to long drawn out highly contentious litigation which will no doubt cause immense political as well as environmental and economic damage to all concerned. A little more political courage now would avoid that fate, which would inevitably be "detrimental to the proper functioning" of the European Union.

CONCLUSIONS

The Committee on the Environment, Public Health and Consumer Protection calls on the Committee on Economic and Monetary Affairs and Industrial Policy, as the committee responsible, to incorporate the following amendments in its report:

Text proposed by the Commission

Amendments by Parliament

(Amendment 1)
Preamble 1

Having regard to the Treaty establishing the European Community, and in particular Article 99 thereof,

Having regard to the Treaty establishing the European Community, and in particular Articles 99 and 130s (2), first indent, thereof,

(Amendment 2)
Recital 2a (new)

Whereas the introduction of harmonised levels of taxation on energy products can only be an initial step with regard to the smooth operation of the Internal Market and a coherent employment and environmental policy; whereas the long-term objective should be a Europe-wide ecological tax reform which taxes the consumption of natural resources and impairment of the environment while removing the burden of taxation from efforts to achieve sustainable development; whereas the main requirement for a genuine change of direction is a tax on CO2 emissions;

(Amendment 3)
Recital 5

Whereas, as a party to the United Nations Framework Convention on Climate Change, the European Union has undertaken to take the measures required to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous interference with the climate system ;

Whereas, as a party to the United Nations Framework Convention on Climate Change, the European Union has undertaken to take the measures required to stabilize and in time to reduce, greenhouse gas concentrations in the atmosphere to a level that will prevent dangerous interference with the climate system;

(Amendment 4)
Recital 6

Whereas the taxation of energy products is one of the instruments available for achieving these objectives ;

Whereas the taxation of energy products is one of the key instruments available for achieving these objectives ;

(Amendment 5)
Recital 21

Whereas the minimum levels of taxation must reflect the competitive position of the different energy products ;

Whereas the minimum levels of taxation must reflect not only the competitive position but also the environmental and public health effects of the different energy products ;

(Amendment 6)
Recital 23 (a) (new)

Whereas, pending the adoption by the Council of common rules on a carbon dioxide/energy tax, Member States should be encouraged to apply other parameters, notably carbon content, to their national systems of energy taxation without the consequent differences in fiscal treatment being in breach of the rules of the Single Market ;

(Amendment 7)
Recital 24

Whereas the minimum levels of taxation applicable to energy products other than mineral oils must be increased gradually ;

Whereas the minimum levels of taxation applicable to energy products other than renewable sources of energy must be increased constantly in real terms ;

(Amendment 8)
Recital 25

Whereas it is necessary, in order to prevent a loss of value in Community minimum levels, to draw up a schedule of biennial increases in these minimum levels and to provide for the Council, not later than 1 January 2001, to lay down new levels for a further period ;

Delete

(Amendment 9)
Recital 27

Whereas Member States should be permitted to apply, if they so wish, certain other exemptions or reduced levels of taxation below the Community minimum levels within their territory, where that would not be detrimental to the proper functioning of the internal market and would not result in any distortions of competition ;

Whereas Member States should be permitted to apply, if they so wish, certain other exemptions or reduced levels of taxation below the Community minimum levels within their territory, where that would not be detrimental to the proper functioning of the Single Market or where it would enhance environmental, public health or other benefits ;

(Amendment 10)
Recital 29

Whereas, in particular, in order to promote the use of alternative energy sources, renewable forms of energy must be able to enjoy preferential treatment ;

Whereas, in particular, in order to promote a cleaner, more sustainable environment, renewable forms of energy must be exempted from the scope of this Directive ;

(Amendment 11)
Recital 29a (new)

Whereas reduced minimum levels of taxation on motor and heating fuels with a particularly low sulphur content are appropriate in order to achieve the objectives of Directive 98/70/EC (quality of internal combustion and diesel fuels) and Directive ../../EC (reduction of the sulphur content of certain automotive fuels)

(Amendment 12)
Recital 29b (new)

Whereas the European Community and its individual Member States are bound by international agreements to exempt energy products for use in commercial aviation from taxation on fuel; whereas, however, this exemption is not consistent with a fiscal policy which taxes the consumption of natural resources and impairment of the environment; whereas the European Commission and the Member States will seek an abolition of the exemption in future international agreements;

Whereas, in order to reduce emissions of CO2 from commercial aviation, which is the most rapidly growing sector, and to push for the development of low-consumption aircraft, the European commission will submit, no later than 1 June 1999, appropriate proposals as an alternative to taxation on fuels;

(Amendment 13)
Recital 32

Whereas Member States should be authorized to grant tax refunds to firms incurring investment expenditure aimed at improving energy efficiency and those whose energy costs represent a substantial proportion of the value of their sales ;

Whereas Member States should be authorized to grant tax refunds to firms incurring investment expenditure aimed at improving energy efficiency and reducing emissions that damage the environment and public health and those whose energy costs represent a substantial proportion of the value of their sales;

(Amendment 14)
Recital 34

Whereas such notification does not release Member States from the obligation, laid down in Article 93(3) of the Treaty, to notify certain national measures ;

Whereas such notification does not release Member States from the obligation, laid down in Article 93(3) of the Treaty, to notify all national aids not permitted by this Directive ;

(Amendment 15)
Article 1, paragraph 1

1. Member States shall impose taxation on energy products in accordance with this Directive;

1. Member States shall impose taxation on energy products, including electricity and heat, in accordance with this Directive;

(Amendment 16)
Article 2, paragraph 1

1. For the purposes of this Directive, "energy products" shall cover the products specified below :

1. For the purposes of this Directive, "energy products" shall cover the products specified below :

(a)products falling within CN codes1507 to 1518 ;

(a) Delete

(b)products falling within CN code 2207 ;

(b)products falling within CN code 2207 ;

(c)products falling within CN code2701 to 2715 ;

(c)products falling within CN code 2701 to 2715 ;

(d)products falling within CN codes 2901 and 2902 ;

(d)products falling within CN codes 2901 and 2902 ;

(e)products falling within CN code 2905 ;

(e)products falling within CN code 2905 ;

(f)products falling within CN code 3403 ;

(f) Delete

(g)products falling within CN code 3811 ;

(g)products falling within CN code 3811 ;

(h)products falling within CN code 3817 ;

(h)products falling within CN code 3817 ;

(i)products falling within CN codes 4401 and 4402 ;

(i) Delete

(Amendment 17)
Article 2, paragraph 2

2. This Directive shall also apply to :

2. For the purposes of this Directive, "electricity and heat" shall mean electricity falling within CN code 2716 and heat resulting from industrial processes which are not taxed under this Directive and which is offered for sale for heating purposes.

a) electricity falling within CN code 2716

b) heat generated during the production of electricity

(Amendment 18)
Article 2 (a) (new)

By way of exemption from Article 2, this Directive shall not apply to :

(a) energy products referred to in Article 2 under fiscal control for the purposes of pilot projects for the technological development of more environmentally-friendly products or to develop energy products from renewable sources ;

(b) products falling within CN codes 2207 20 00 and 2905 11 00 ;

(c) all products referred to in Article 2 which are produced from renewable resources, including hydro-electricity and electricity of solar, wind, tidal or geothermal origin and alcohol from agricultural raw materials ;

(d) electricity generated from hydrogen-based or other fuel cells and gas from biomass or waste origin ;(e) heat generated during the production of electricity .

(Amendment 19)
Article 4, paragraph 2

2. Taxable energy products other than those for which a minimum level of taxation is specified in this Directive shall be subject to taxation, according to use, at a level which is not below the minimum level applicable to the equivalent heating fuel or motor fuel.

2. Taxable energy products listed in Article 2 and not exempt under Article 2a other than those for which a minimum level of taxation is specified in this Directive shall be subject to taxation, according to use, at a level which is not below the minimum level applicable to the equivalent heating fuel or motor fuel.

(Amendment 20)
Article 5, paragraph 1 (a) (new)

Pending the adoption by the Council of common rules for the purposes of the policy objectives referred to in this paragraph, Member States which apply higher rates of tax, either in proportion to the carbon content of fuels in order to abate greenhouse gas emissions, or for reasons of public health policy, shall not be in infringement of the rules of the Single Market.

(Amendment 21)
Article 5, paragraph 2

2. When, for environmental and/or health policy reasons, different standards are established at a Community level for products referred to in this Directive, Member States wishing to apply differential rates of taxation to a product according to the quality of that product shall incorporate criteria established at Community level.

2. When, for environmental and/or public health policy reasons, different standards are established at a Community level for the products referred to in Article 2 and not exempt under Article 2a, Member States shall apply differential rates of taxation to the products concerned according to the criteria established at Community level.

(Amendment 22)
Article 6

As from 1 January 1998, the minimum levels of taxation applicable to motor fuels shall be fixed as follows:

As from 1 January 1998, the minimum levels of taxation applicable to motor fuels shall be fixed as follows:

- for petrol: ECU 417 per 1 000 litres at a temperature of 15 ˚C. Moreover, Member States shall apply to leaded petrol a rate oftaxation above that charged on unleaded petrol,

- for petrol: ECU 452 per 1 000 litres at a temperature of 15 ˚C. Moreover, Member States shall apply to leaded petrol a rate of taxation above that charged on unleaded petrol,

- for petrol with specifications pursuant to Annex III of Directive 98/70/EC: ECU 429 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil: ECU 310 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil: ECU 403 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil with specifications pursuant to Annex III of Directive 98/70/EC: ECU 383 per 1 000 litres at a temperature of 15 ˚C,

- for kerosene: ECU 310 per 1 000 litres at a temperature of 15 ˚C,

- for kerosene: ECU 403 per 1 000 litres at a temperature of 15 ˚C,

- for liquid petroleum gas: ECU 141 per 1 000 kg,

- for liquid petroleum gas: ECU 183 per 1 000 kg,

- for natural gas: ECU 2,9 per gigajoule.

- for natural gas: ECU 3.8 per gigajoule.

(Amendment 23)
Article 7(1)

1. Notwithstanding Article 6 of this Directive, the minimum levels of taxation applicable to the following products used as motor fuel for the purposes set out in paragraph 2 of this Article shall be fixed as follows:

1. Notwithstanding Article 6 of this Directive, the minimum levels of taxation applicable to the following products used as motor fuel for the purposes set out in paragraph 2 of this Article shall be fixed as follows:

- for gas oil: ECU 32 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil: ECU 42 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil with specifications pursuant to Annex III of Directive 98/70/EC: ECU 40 per 1 000 litres at a temperature of 15 ˚C,

- for kerosene: ECU 30 per 1 000 litres at a temperature of 15 ˚C,

- for kerosene: ECU 39 per 1 000 litres at a temperature of 15 ˚C,

- for liquid petroleum gas: ECU 41 per 1 000 kg,

- for liquid petroleum gas: ECU 53 per 1 000 kg,

- for natural gas: ECU 0.3 per gigajoule.

- for natural gas: ECU 0.4 per gigajoule.

(Amendment 24)
Article 8

As from 1 January 1998, the minimum levels of taxation applicable to heating fuels shall be fixed as follows:

As from 1 January 1998, the minimum levels of taxation applicable to heating fuels shall be fixed as follows:

- for gas oil: ECU 21 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil: ECU 32 per 1 000 litres at a temperature of 15 ˚C,

- for gas oil falling within CN code 2710 00 69 with a sulphur content pursuant to Article 4 of Directive ../../EC (reduction of the sulphur content of certain fuels): ECU 30 per 1 000 kg,

- for heavy fuel oil falling within CN code 2710 00 74: ECU 18 per 1 000 kg,

- for heavy fuel oil falling within CN code 2710 00 74: ECU 27 per 1 000 kg,

- for heavy fuel oil falling within CN code 2710 00 74 with a sulphur content pursuant to Article 3 of Directive ../../EC (reduction of the sulphur content of certain fuel): ECU 25 per 1 000 kg,

- for other heavy fuel oil falling within CN code 2710: ECU 22 per 1 000 kg,

- for other heavy fuel oil falling within CN code 2710: ECU 33 per 1 000 kg,

- for other heavy fuel oil falling within CN code 2710 00 71 to 2710 00 78 with a sulphur content pursuant to Article 3 of Directive ../../EC (reduction of the sulphur content of certain fuel): ECU 25 per 1 000 kg,

- for kerosene: ECU 7 per 1 000 litres at a temperature of 15 ˚C,

- for kerosene: ECU 11 per 1 000 litres at a temperature of 15 ˚C,

- for liquid petroleum gas: ECU 10 per 1 000 kg,

- for liquid petroleum gas: ECU 15 per 1 000 kg,

- for natural gas: ECU 0.2 per gigajoule,

- for natural gas: ECU 0.3 per gigajoule,

- for solid energy products: ECU 0.2 per gigajoule.

- for solid energy products: ECU 0.3 per gigajoule.

(Amendment 25)
Article 9

As from 1 January 1998, the minimum level of taxation on electricity and heat generated during its production shall be fixed at ECU 1 per megawatthour.

Without prejudice to the exemptions referred to in Article 2a, as from 1 January 1998, the minimum level of taxation on electricity and heat shall be fixed at ECU 1 per megawatthour.

(Amendment 26)
Article 10, paragraph 1

1. The minimum levels of taxation laid down in this Directive shall be amended on 1 January 2000, to the amounts shown in annex I.

1. The minimum levels of taxation laid down for the products listed in Article 2.1. of this Directive and not exempted under Article 2a shall automatically be increased each year from 1 January 2000, to ensure that the minimum tax on these products rises in real terms for each subsequent year..

(Amendment 27)
Article 10, paragraph 2

2. Not later than 1 January 2001, the Council, acting unanimously after consulting the European Parliament, shall fix, on the basis of a report and a proposal from the Commission, the minimum levels of taxation for a further period beginning on 1 January 2002 and shall adopt such other measures as may be appropriate to improve the functioning of the system of taxation of energy products. Until the Council adopts new levels of taxation on the basis of the Commission report and proposal, Member States shall treat the amounts shown in Annex I as target levels of taxation from 2002.

2. The amount of the annual increase referred to in paragraph 1 shall be fixed by the Commission at least six months prior to the date it takes effect, taking into account the proper functioning of the Single Market, the real value of the level of taxation, the achievement of environmental, public health and other objectives of the Treaty. In this calculation, the Commission shall give special priority to the achievement of Member States' climate change commitments. Without prejudice to the provisions of paragraph 1, it shall also include an analysis of the measures taken by Member States to achieve tax neutrality in implementing this Directive and the Commission's proposal shall take full account of this factor.

The report by the Commission and the consideration by the Council shall take into account the proper functioning of the internal market, the real value of the levels of taxation, the achievement of environmental policy objectives and the other objectives of the Treaty. It shall also include an analysis of the measures taken by Member States to achieve tax neutrality in implementing this Directive and the Commission's proposal shall take full account of this factor.

(Amendment 28)
Article 14, paragraph 1

1. Without prejudice to other Community provisions, Member States may apply total or partial exemptions or reductions in the level of taxation to :

1. Without prejudice to other Community provisions, Member States may apply total or partial exemptions or reductions in the level of taxation to :

(a) energy products used under fiscal control in the field of pilot projects for the technological development of more environmentally-friendly products or in relation to fuels from renewable resources ;

Delete

(b) energy products falling within CN codes 1507 to 1518, 2207 20 00 and 2905 11 00, 4401 and 4402 ;

Delete

(c) forms of energy which are of solar, wind, tidal, geothermal origin or from biomass or waste ;

Delete

(d) forms or energy which are of hydraulic origin produced in hydroelectric installations with a capacity of less than 10 MW ;

Delete

(e) heat generated during the production of electricity ;

Delete

(f) energy products used for the carriage of goods and passengers by rail ;

(f) energy products used for the carriage of goods and passengers by rail ;

(g) energy products used for navigation on inland waterways other than in private pleasure craft ;

(g) energy products used for navigation on inland waterways other than in private pleasure craft ;

(h) natural gas in Member States whose gas market is in the process of actual development for as long as the share of gas in the domestic and industrial market is less than 10% and for a period of no more than 10 years after the coming into force of this Directive.

(h) natural gas in Member States whose gas market is in the process of actual development for as long as the share of gas in the domestic and industrial market is less than 10% and for a period of no more than 10 years after the coming into force of this Directive.

(Amendment 29)
Article 14, paragraph 3

3. The Commission shall report to the Council on the fiscal, economic, agricultural, energy, industrial and environmental aspects of the exemptions or reductions granted in accordance with Article 14(1)(b) before 1 January 2001 and will make proposals as to whether they should be abolished, modified or extended.

Delete

(Amendment 30)
Article 15, paragraph 1

1. Member States may refund all or part of the amount of tax paid in relation to investment expenditure incurred by a firm in improving the efficient use of energy up to a limit of 50% of eligible expenditure incurred.

1. Member States may refund all or part of the amount of tax paid in relation to investment expenditure incurred by a firm in improving the efficient use of energy or for reducing its carbon dioxide and other environmentally harmful or noxious emissions, up to a limit of 50% of eligible expenditure incurred.

(Amendment 31)
Article 15, paragraph 3

3. Member States may also refund to the producer some or all of the amount of tax paid by the consumer on electricity and heat generated during its production in the case of electricity produced from products specified in Article 14 paragraphs 1 (b), (c) and (d).

Delete

(Amendment 32)
Article 16

1. In addition to the provisions set out in the previous Articles, Member States may be authorized to apply, for specific policy reasons and for a specified period, exemptions or levels of taxation below the minimum levels specified in this Directive.

Deleted

In particular, a Member State may be authorized to apply levels of taxation on motor fuels between 100 % and 60 % of the minimum levels specified in this Directive if it introduces or modifies, on a non-discriminatory basis, specific charging systems for road transport targeting recovery of transport costs, such as infrastructure, congestion and environmental costs.

2. A Member State wishing to introduce such a measure shall accordingly inform the Commission and shall also provide the Commission with all relevant or necessary information and an evaluation of the expected effects of the measure.

The Commission shall examine the request, taking into account, inter alia, the proper functioning of the internal market, the need toensure fair competition and the Community environment, and, where appropriate, transport policies.

3. For authorizations granted pursuant to the first subparagraph of paragraph 1, the following procedure shall be applicable.

The measure may be authorized for a period of three years, with the possibility of renewal, using the procedure set out in Article 24 of Directive 92/12/EEC relating to the holding, movement and monitoring of products subject to excise duty.

If the Commission considers that the exemptions or reductions provided for in paragraph 1 are no longer sustainable, particularly in terms of fair competition or proper functioning of the internal market, or Community policy in the area of protection of the environment, it shall submit appropriate draft measures to the Committee on Excise Duties. Decision on these draft measures shallbe taken according to the procedure set out in Article 24 of Directive 92/12/EEC.

In any event, within three years of the entry into force of this Directive and every subsequent three years, the situation with regard to the exemptions or reductions authorized in accordance with paragraph 1 shall be reviewed on the basis of a report by the Commission. It shall be determined, using the procedure set out in Article 24 of Directive 92/12/EEC, whether any or all of them shall be abolished, modified or extended.

4. For authorizations granted pursuant to the second subparagraph of paragraph 1, the following procedure shall be applicable.

The measure may be authorized using the procedure set out in Article 24 of Directive 92/12/EEC relating to the holding, movementand monitoring of products subject to excise duty.

The Commission shall monitor the impact of decisions taken pursuant to the provisions of the second subparagraph of paragraph 1 and present a report on the implementation of such measures every three years. The procedure of Article 24 of Directive 92/12/EEC applies for proposals of the Commission to abolish or modify existing authorizations.

5. Member States shall be free to give effect to the exemptions or reductions in the level of taxation mentioned in this Article by refunding all or part of the amount of taxation paid.

(Amendment 33)
Article 17, paragraph 1

1. Only the following energy products shall be subject to the provisions of Titles II to IV of Directive 92/12/EEC :

1. Only the following energy products shall be subject to the provisions of Titles II to IV of Directive 92/12/EEC :

(a) products falling within CN codes 1507 to 1518 when intended for use or offered for sale as motor fuel ;

Delete.

(b) products falling within CN code 2207 20 00 when intended for use or offered for sale as motor fuel ;

Delete.

(c) products falling within CN codes 2707 10, 2707 20, 2707 30 and 2707 50 ;

(c) products falling within CN codes 2707 10, 2707 20, 2707 30 and 2707 50 ;

(d) products falling within CN codes 2710 00 11 to 2710 00 78. However, for products falling within CN codes 2710 00 21, 2710 00 25 and 2710 00 59, the control and movement provisions shall only apply to bulk commercial movements ;

(d) products falling within CN codes 2710 00 11 to 2710 00 78. However, for products falling within CN codes 2710 00 21, 2710 00 25 and 2710 00 59, the control and movement provisions shall only apply to bulk commercial movements ;

(e) products falling within CN codes 2711 (except 2711 11 00, 2711 21 00 and 2711 29 00) ;

(e) products falling within CN codes 2711 (except 2711 11 00, 2711 21 00 and 2711 29 00) ;

(f) products falling within CN code 2901 10 ;

(f) products falling within CN code 2901 10 ;

(g) products falling within CN codes 2902 20, 2902 30, 2902 41 00, 2902 42 00, 2902 43 00 and 2902 44 ;

(g) products falling within CN codes 2902 20, 2902 30, 2902 41 00, 2902 42 00, 2902 43 00 and 2902 44 ;

(h) products falling within CN code 2905 11 00 when intended for use or offered for sale as motor fuel.

Delete.

(Amendment 34)
Article 18, paragraph 3

3.The consumption of energy products within the curtilage of an establishment producing energy products falling within CN codes 2707, 2709 to 2715, 2901, 2902 38 11 and 3817 shall not be considered a chargeable event giving rise to taxation as long as the consumption is for the purpose of such production.

3. The consumption of the energy products referred to in Article 2.1 which are not covered by the exemption referred to in Article 2a for the purpose of producing the energy products referred to in Article 2.2 shall be a chargeable event giving rise to taxation.

(Amendment 35)
Article 23, paragraph 2

2. Measures such as tax exemptions, tax reductions, tax differentiation and refunds of tax foreseen under this Directive might constitute state aid and in those cases have to be notified to the Commission under Article 93(3) of the Treaty.

2. Except insofar as they are implemented demonstrably for environmental and/or public health policy reasons, measures such as tax exemptions, tax reductions, tax differentiation and refunds of tax foreseen under this Directive might constitute state aid and in those cases have to be notified to the Commission under Article 93(3) of the Treaty.

Information provided to the Commission on the basis of this Directive does not free Member States from the notification obligation under Article 93(3) of the Treaty.

Information provided to the Commission on the basis of this Directive does not free Member States from the notification obligation under Article 93(3) of the Treaty.

Last updated: 27 April 2000Legal notice