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EU Economic and Financial Affairs Council Discusses Environmental Taxation — Orbitax Tax News & Alerts

The European Commission has published a speech given by Vice President Valdis Dombrovskis following a summit of the EU Economic and Financial Affairs Council (ECOFIN) held 21 to 22 May 2021, which included discussion of environmental taxation. In this regard, the Vice President's comments include the following:


Now let me say a few words about another important discussion we had today: on the future of environmental taxation.

This will play an important role in our journey to a climate-neutral Europe as part of the European Green Deal.

It reflects our commitment to tackling climate change. And it will contribute to long-term sustainable growth as part of the recovery.

We all agreed on some key points, that green taxation can:

  • encourage a sustainable use of resources;
  • reduce waste and pollution;
  • bring economic, social and health benefits;
  • help to broaden our tax base and encourage the shift away from labour taxes.

In July, the Commission intends to overhaul the relevant EU climate and energy legislation aligned with our more ambitious 55% emission reduction target for 2030.

So we will put forward the so-called "Fit for 55" package.

This will include a proposal for revising our outdated Energy Taxation Directive and a proposal for a Carbon Border Adjustment Mechanism – or CBAM.

The CBAM - as the minister already explained - is an environmental measure. It will address the risk of carbon leakage by equalising the prices of carbon paid for domestic and imported products. It should incentivise greater use of carbon pricing globally - and that would be a good way to fight climate change.

Of course, it's not going to be easy.

But we are confident that we can get a consensus on a targeted CBAM proposal that is gradual over time, and WTO compliant. And we will obviously also strive to make it efficient.

There is also broad support for a revision of our Energy Taxation Directive and an acknowledgement that we will need to consider including sectors such as aviation and maritime.