If European countries want to tax the carbon content of fuels, they'll have to do so unilaterally. The European Union (EU) won't do it for them.
Failure of the European carbon tax embarrasses EU officials planning to attend the March meeting in Berlin on international efforts to cut carbon dioxide emissions. These earnest statespeople had hoped to be able to boast of Europe's spirit of cooperation and mutual sacrifice.
WHOSE INTERESTS?
At a baser level, removal of the immediate carbon tax threat works out well for sellers and buyers of hydrocarbon fuels. That is, it serves the economic interests of people who pay the national bills if not the political interests of the statespeople who represent them in international councils. Such vulgar practicalities have a way of becoming lost in the heady ethers of diplomacy. When statespeople traffic in sacrifice, they seldom mean their own.
Credit for suspension of the EU carbon tax belongs largely to the U.K., which has all along resisted the gravitation of official prerogative toward Brussels, seat of EU governance. It also happens that the U.K. will have comparatively little difficulty meeting CO2 reduction commitments under the 1990 Rio de Janeiro Convention on Climate Change.
Even as the U.K. slew the energy tax dragon in Brussels, however, the beast was snarling in London. The government of Prime Minister John Major tried to raise the value added tax rate on heating fuel to 17.5% from 8% and failed. Alienated members of Major's own Tory party blocked the levy after he punished them for defecting in a vote of confidence over financial contributions to the EU.
There's that deadly combination again: taxes and international relations. While the fuel tax vote weakens Major politically, it removes an economic threat to U.K. fuel buyers. And the reason for controversy, according to prevailing wisdom, is the deep division in England over how to deal with the EU.
That's what they said in Britain when former Prime Minister Margaret Thatcher, who had far greater doubts than her successor does about European coziness, fell from power after demanding an unpopular poll tax. Is it possible that taxes play a greater role than international relations do in European politics, or at least greater than European politicians want to admit? Is it possible that, to the extent this is so, the benefits and drawbacks of taxes receive less than satisfactory discussion until taxpayers have their say?
In fact, there are good and bad reasons to raise taxes, and precious few of them have anything to do with international relations. This point has pertinence in the U.S., where one of the worst but most-often voiced reasons to raise gasoline taxes is that vehicle fuel levies are higher elsewhere.
RATIONALIZATION
For a carbon tax, the only possible rationalization is that statespeople meeting in Rio in 1990 considered it good politics (if confined to the industrialized world). Scientific questions, such as whether taxing carbon would significantly reduce CO2 emissions, whether CO2 emissions caused global warming, and whether global warming existed at all, didn't receive much attention. Statespeople made an international agreement, so science and the interests of people called upon to make sacrifices were not supposed to matter.
Until the U.K. swept economic reality through the collectivist mists, of course. Maybe the principle was at work in Britain, too. Maybe the British are less interested in the politics of the EU than they are the economics of paying twice what they did before for warmth. Politics can be as simple as that.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.
