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   Mrs Scrivener,  the Member of the Commission with special  responsibility
   for  taxation, the customs union and matters relating to the overall  tax
   burden,  today opened the Forum Europe Conference on the environment  and
   the follow-up to the Rio Summit.

   In her address, Mrs Scrivener particularly emphasized the tax instruments
   available  to policy-makers in the environmental field and  declared  her
   marked  preference  for  tax  incentives, which  were  better  suited  to
   promoting new technologies and did more to protect the environment.

   Since regulatory action was losing momentum, those advocating use of  the
   tax  instrument  were stressing that it provided a means  of  influencing
   prices:  behaviour could be altered by increasing the prices of polluting
   products  or  lowering those of clean products.   This  mode  of  action,
   which  was  both universal and decentralized, was considered to  be  more
   effective than legislation.

   Mrs Scrivener  pointed out, however, that such economic instruments  were
   not  meant  to be used to the exclusion of others but  were  intended  to
   supplement the traditional regulatory instruments.

   The  choice  of  a  particular type of instrument had to  be  made  on  a
   case-by-case basis, and the fact that, for a given environmental problem,
   there  was competition between a number of forms of action could even  be
   viewed as a positive element.


   In deciding to explore the tax avenue, it was essential to consider using
   the  whole  panoply of tax instruments.  Action could  be  taken  through
   rates, through the tax base or even through the method of calculation.

   A choice could also be made between, on the one hand, creating a new  tax
   or  increasing an existing tax and, on the other, using  tax  incentives,
   i.e. tax  reliefs.  Pride  of  place  had  recently  been  given  to  tax
   incentives.  It  had  been shown in practice that they  could  be  highly
   effective  because  of  their  stimulating  psychological  and  financial

   In the case of unleaded petrol, for example, the minimum excise-duty rate
   laid  down at Community level was ECU 50 lower than the minimum rate  for
   leaded  petrol,  which  was ECU 337  per  1 000  litres.  Consumption  of
   unleaded  petrol in the Community had risen from 3% of total  motor  fuel
   consumption  in  1987  to  about 40% in 1991, and  the  trend  was  still
   continuing.  This  was  an  argument  in  favour  of  an  approach  based
   predominantly  on  tax incentives and, if a new tax  were  created,  this
   would  provide justification for the tax neutrality approach  leading  to
   the  abolition, or reduction of, other taxes.  Attention had also  to  be
   paid  at an economic level to the impact of the tax strategies chosen  on
   the international competitiveness of Community industry.


   On  28 February 1992  the  Commission presented a  proposal  designed  to
   create a tax advantage for fuels from agricultural sources ("biofuels").

   The aim of the proposal was to bring about a Community-wide reduction  of
   at least 90% in the excise-duty rates applied to biofuels.

   The  initiative  was  based  on a favourable  analysis  of  the  economic
   viability of biofuels and presented advantages in other Community  policy
   areas, primarily environmental policy.

   The  analysis showed that biofuels offered clear advantages in  terms  of
   gaseous  emissions:  reduction  in  CO2  (gas  producing  the  greenhouse
   effect)  and  SO2  (which  caused  acid  rain).  This  was   particularly
   important  as  the transport sector currently accounted for some  25%  of
   CO2 emissions in the Community.

   The tax advantage applied to all the uses to which biofuels could be put,
   without  limitation.  It  thus covered biofuels used  for  private  cars,
   commercial  vehicles,  captive vehicle fleets,  public  transport,  etc.,
   provided, of course, that the proposal was adopted as soon as possible by
   the Council.


   The  idea  of  taxing  CO2,  the subject  of  a  Commission  proposal  of
   27 May 1992,  was a radical departure from traditional tax  schemes.  Tax
   neutrality, environment-protection incentives and conditionality were all
   integral parts of the proposal.

   Tax neutrality

   Although  it  was  a  tax initiative, the  Commission  proposal  was  not
   designed to produce additional revenue but rather to alter behaviour in a
   manner more favourable to the environment.

   1   See memo P(92)11 of 28 February 1992.

   The  proposal stipulated that the revenue accruing to Member States  from
   the  tax  would have to be offset by reductions in other taxes  or  other
   statutory contributions or by tax incentives.

   Tax incentive

   The  arrangements  envisaged provided for a tax incentive for  all  firms
   investing  in energy saving or in schemes to reduce CO2  emissions.  More
   often than not, these investments made use of technological advances.

   The  Commission  proposal  applied to  both  individuals  and  firms.  It
   covered   reafforestation  programmes,  home  and  office   environments,
   electric  vehicles,  clean means of transport and,  more  generally,  any
   production process which improved a firm's "ecological balance-sheet".

   This  incentive to clean and efficient investment would influence  firms'
   behaviour and favour those that endeavoured to protect the environment.


   The application of the tax was conditional upon the other OECD  countries
   introducing  a  similar tax or measures having  an  equivalent  financial

   That condition was, of course, essential.  It was designed to ensure that
   Community  industry  was not placed at a disadvantage compared  with  its
   principal  competitors, given the global scale of  the  greenhouse-effect

   Overall,  therefore,  the  Commission's proposal on the  CO2  tax  was  a
   balanced  one.  This  approach ensured that ample account  was  taken  of
   firms' economic concerns and that priority was given to new technologies.

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