PDF to HTML - Convert PDF files to HTML files

Miljø- og Planlægningsudvalget 2006-07
KOM (2007) 0140 Bilag 3
Offentligt

J.nr. DEP 239-00002

August 3 2007

The Danish government’s consultation response to the Com-

mission's "Green Paper on market-based instruments for envi-

ronment and related policy purposes" (COM(2007) 140 final)

The Danish government finds it positive that, with this Green Paper,

the Commission has launched a public debate about the use of mar-

ket-based instruments (MBIs) and the government concurs with the

Commission’s overriding wish to promote the use of MBIs in the envi-

ronment and energy area. MBIs are cost-effective and can ensure

flexible framework management, and the price mechanism provides a

better basis for enterprises and consumers' willingness to show re-

sponsibility for solving more problems in the environment area.

Today, Denmark is among the EU Member States which have come

furthest in using MBIs in the environment and energy area. Consider-

ation for the competitiveness of enterprises means that some taxes

are designed in a way that reduces the incentive effect for the enter-

prises most exposed to competition. Greater use of MBIs in the envi-

ronment and energy area in other EU Member States, including

common EU taxes, will help create more uniform competitive condi-

tions. However, experience so far from the negotiations on harmoni-

sation of taxes in the environment and energy area suggests that

reaching an agreement on new proposals can be an extremely diffi-

cult political process.

The Danish government agrees with the Green Paper’s assessment

that MBIs can seldom stand alone, as many environmental problems

are of a nature that calls for a broad range of instruments, and the

combination and design of the instruments are therefore decisive for

the effectiveness of the efforts invested.

The Danish government supports the Commission’s proposal to es-

tablish a forum for the exchange of experience on Member State’s

use of MBIs in the environment and energy area.

The Danish government's position on a number of issues raised in

the Green Paper is outlined in the following:

Ministry of the Environment • Højbro Plads 4 • DK-1200 København K Denmark

Tel +45 72 54 60 00 • CVR 12854358 • EAN 5798000862005 • [email protected] • www.mim.dk

PDF to HTML - Convert PDF files to HTML files

2.2 Market-based instruments in the EU context

What are the areas and options for the further use of market-

based instruments at EU or national level?

There are still a number of areas where current market prices do not

reflect the full environmental costs/environmental externalities. Simi-

larly, the extent to which Member States make use of MBIs differs

greatly, as do the levels of taxation. This suggests a great potential

for wider use of MBIs. However, it also means that in countries which

have led the way in the use of MBIs, as has Denmark, considerations

for competitiveness also have the effect that some Danish taxes are

designed in a way that reduces the incentive effect for the enterprises

most exposed to competition, so that these enterprises are not placed

in a position that is less favourable than for similar enterprises in oth-

er Member States.

Could market-based instruments be used in a way that pro-

motes competitiveness, and does not impose an undue burden

on consumers, in particular citizens with a low-income, but at

the same time ensures revenue for public budgets?

In general, the Danish government believes that there is a need to be

clear on objectives with taxation. Environmental taxation should be

used out of consideration for their effect on the environment and na-

ture. Minimum levels for Member States’ environmental taxes on in-

dustries will promote both more equal competition and positive envi-

ronmental effects.

2.3 Growth, jobs and a clean environment – the case for envi-

ronmental tax Reforms

Should the EU more actively promote environmental tax re-

forms at national level? How could the Commission best facili-

tate such reforms? Can it for example offer some kind of co-

ordination process or procedure?

On an overall basis, the Danish government believes that it should

still be up to the individual Member States alone to decide on the de-

sign of the tax structure.

PDF to HTML - Convert PDF files to HTML files

However, the Danish government also believes that the EU can rec-

ommend the Member States to carry out environmental tax reforms

as a tool for achieving targets for the environment area most effec-

tively and ensuring the social dimension of the overall tax structure.

Furthermore, the Danish government believes that the Commission

can promote environmental tax reforms in the Member States by

clarifying the connection between MBIs and EU State aid rules. The

objective would be to improve the possibilities for using a tax instru-

ment in combination with recycling of tax revenues in a way that will

support the effect of the relevant MBI further.

Would the establishment of the above mentioned MBI Forum be

useful to stimulate exchanges of experience/best practice on

Environmental Tax Reform between Member States? How

could it be organised in an optimal way? How should it be com-

posed to avoid potential overlap with existing structures?

In the opinion of the Danish government, establishing an EU forum

for the exchange of experience on the use of MBI would be useful.

2.4. Reform of environmentally harmful subsidies

What is, in the light of national experiences, the best way to ad-

vance the process of reforming environmentally harmful subsi-

dies?

The Danish government is generally of the opinion that environmen-

tally harmful subsidies should be phased out and is keenly looking

forward to the Commission’s announced roadmap for a sector-by-

sector phasing-out of environmental subsidies.

3.1. Streamlining and developing the Energy Taxation Directive

Should the Energy Taxation Directive be reviewed to make a

clearer link to the policy objectives the Directive integrates, in

particular in the field of environment and energy? Would this

make energy taxation a more effective instrument by better

combining the incentive effects of taxation with the ability to

generate revenue?

PDF to HTML - Convert PDF files to HTML files

The Danish government finds the Commission’s ideas about chang-

ing the tax basis in the Energy Taxation Directive to an energy tax

and an environmental tax interesting. The changes would underpin

the Community’s target for energy efficiency, CO

reductions and se-

curity of supply. The Commission’s considerations concur with gen-

eral recommendations that the tax basis for behaviour-regulating tax-

es should be designed so that there is a direct connection between

the tax and the objectives of the tax.

The Danish government believes that the Commission can promote

Member State use of MBIs by clarifying and specifying, in connection

with the new framework conditions for State aid in the environment

area, how the energy taxation, the EU ETS and State aid rules work

together. As stated previously, the Danish government is of the opin-

ion that, if a Member State eases an environmental tax burden in or-

der to avoid double regulation due to the EU ETS, this should not be

considered State aid. In this case double regulation has no purpose

as no extra environmental effect is achieved from it. Consequently,

eliminating the double regulation should be possible and should not

count as State aid.

The Danish government therefore agrees with the Commission’s

overriding idea that sectors regulated by the EU ETS should be ex-

empted from the CO

tax element in a revised Energy Taxation Di-

rective. In relation to the existing Energy Taxation Directive, the prob-

lem of double regulation should be solved by exempting enterprises

subject to double regulation from environmental energy taxation.

The Commission’s considerations with regard to changing the Energy

Taxation Directive therefore do not change the position of the Danish

government in the matter of State aid and exemption from the CO

tax for sectors covered by the EU ETS (double regulation).

3.2. Interaction of energy taxation with other market-based in-

struments, in particular the EU ETS

Would the suggested changes to the Energy Taxation Directive

and the proposed approach to its scope be the best solution for

ensuring coherence between the Directive and the EU ETS?

Are there other options to achieve this objective?

As stated previously, the Danish government believes that due to the

implementation of the CO

ETS it should be possible to abandon na-

tional CO

taxes on enterprises that are subject to quota regulation,

because double regulation, in this case, has no purpose in that no

PDF to HTML - Convert PDF files to HTML files

extra environmental effect is achieved from it. Eliminating the double

regulation should therefore be possible and should not count as State

aid.

What are the potential options that should be explored in order

to provide the necessary incentives to encourage the EU's trad-

ing partners to undertake effective measures to abate green-

house gas emissions?

The Danish government supports the EU’s efforts to promote ambi-

tious CO

reduction targets in a post Kyoto agreement. It is in favour

of a liberal trade policy and therefore, as a general rule, is sceptical

towards trade restrictive policies. However, considering promotion of

the EU climate targets and the global competitiveness of the Com-

munity, the Danish government can accept the instigation of an anal-

ysis of possibilities in accordance with WTO rules for providing the

necessary instruments and incentives to encourage EU’s trade part-

ners to deliver effective measures to limit their greenhouse gas emis-

sions, provided that such an analysis is without prejudice.

In the Danish government’s opinion, part of the negative effects for

the EU sectors most exposed to competition can be off set by ex-

empting fuel consumption covered by the EU ETS from double regu-

lation.

4.1. Tackling the environmental impact of transport

What would be the best MBI to tackle emissions from shipping,

taking into account the specific nature of maritime transport?

How could it be best designed?

The Danish government shares the Commission’s view that possible

use of MBIs as a means of reducing emissions from shipping should

be examined carefully with regard to the legal, political and geograph-

ical circumstances which characterise international maritime

transport. The Danish government believes that binding regulations

on CO

emissions from the shipping industry, preferably, should be

realised under the auspices of the IMO, in order to make for solutions

that will ensure equal terms for the international shipping industry.

The Danish government looks forward to the Commission’s proposal

for the future revision of the EU ETS Directive, as a follow up to the

request by the European Council in March 2007 that a possible ex-

pansion of the Directive’s scope of application to include the shipping

industry be considered.

PDF to HTML - Convert PDF files to HTML files

4.2. The use of MBIs to address pollution and protect resources

4.2.1. Water

How can the Commission most effectively ensure implementa-

tion of the water pricing policies set out in the Water Framework

Directive? What options could be explored to reinforce the links

between investments in national water projects and the intro-

duction of corresponding water pricing to provide incentives for

users and avoid distorting competition?

The Danish government supports the Commission's efforts to pro-

mote the application of user charges and MBIs in relation to imple-

mentation of the Water Framework Directive.

4.2.2. Waste management

If there is insufficient progress to divert waste away from landfill,

should the Commission consider proposing a harmonised land-

fill tax with EU-wide minimum rates?

The Danish government supports the Commission’s ideas about a

common landfill tax with minimum rates.

4.4. The use of MBIs to address air pollution

Do you see scope for using cross border emissions trading

schemes between groups of Member States to combat conven-

tional air pollution through SO2 and NOx? How should such a

system be designed to fit with national taxes and charges that

are applied in several Member States?

The Danish government finds it interesting that the Commission in-

tends to examine the opportunities for using allowance regulation for

other emissions (NOx and SO2 in connection with the new NEC Di-

rective) and together with other regulation (the IPPC Directive). How-

ever, as a general rule, the Danish government is sceptical as to

whether an allowance trading scheme would be the appropriate way

to remedy environmental problems of a regional nature.

5. CONCLUSION

PDF to HTML - Convert PDF files to HTML files

In general, the Danish government supports the Commission's inten-

tion to promote the use of MBIs in environment and energy policy and

to ensure more equal terms of competition in the internal market.

The Danish government believes the interplay between allowance

regulation and regulation via taxes must be clarified so double regula-

tion is avoided. Furthermore, existing double regulation must be elim-

inated without causing unequal competitive conditions or having a

significant negative effect on the state finances of Member States.

Furthermore, the Danish government believes that the Commission

can promote environmental tax reforms in the Member States by

clarifying the connection between MBIs and the EU’s rules on State

aid, with a view to improving the opportunities for combining a tax

instrument with the reversal of proceeds in a way that will further en-

hance the effect of the MBI in question.

Finally, it is the Danish government's opinion that Member Sates that

wish to make use of additional national environmental taxes should

be able to design this regulation in a way that shows consideration for

the situations where the use of tax regulation, to a considerable ex-

tent, inhibits the competitiveness of enterprises, and, furthermore,

that the revision of the current EU rules on State aid in the environ-

ment area should be changed to accommodate this