The European Community was placed in a quandary at the United Nations Earth Summit by President Bush's suggestion that the U.S. taxpayer is an endangered species.
Only the previous week EC approved its new carbon tax, intended to reduce greenhouse gas emissions. It will place a $3/bbl levy on oil beginning in January 1993, rising in $1 steps to $10/bbl by 2000.
But EC also decided the tax should be implemented only if its main industrial competitors introduce similar taxes. The main industrial competitors are Japan and the U. S.
Japan already emits less toxic fumes than the EC-4% of the world total, compared with 13% for the EC-and Bush has effectively ruled out a U.S. carbon tax in the short term. But don't watch his lips.
NEXT MOVES
EC member states must now plan their next moves in the light of Earth Summit talks in Rio de Janeiro. It is unlikely the carbon tax will be written off, given the speed with which it was brought in and its high profile announcement.
Some powerful EC members have ambitious targets for reducing emissions and are still dedicated to achieving them. It may be that the change of EC presidency July 1 from Portuguese to British will bring a change of approach. The British, after all,.are supposed to excel at compromise. But they will have only 6 months to solve this one.
There are many people who believe reducing emissions is essential, but the carbon tax, as it stands, is not the most appropriate method. The European Petroleum Industry Association (Europia) believes that leaving member states to redistribute the tax revenue however they wish will cause economic distortions among countries-and hence oil companies.
The tax itself would reduce EC manufacturers' competitiveness in world markets. There also is a risk of upsetting members of the Organization of Petroleum Exporting Countries, which might impose retaliatory measures.
The International Energy Agency, which acts as a forum for 23 industrialized nations to plan energy policies, has indicated the carbon tax will not be effective because Europeans already pay high taxes on fuels. The carbon tax would add only 8% to gasoline pump prices.
IEA fears that overregulation and subsidies lead to greater emissions of greenhouse gases. It compiles an annual report on its members' subsidies and price interventions and uses this as a comparative tool to help governments chart their progress in efficiencies.
'SIGNIFICANT REWARDS'
Helga Steeg, IEA executive director, told the summit, "The rewards of removing energy subsidies could be significant ... Doing so would achieve dramatic reductions in carbon dioxide emissions. This would be accompanied by worldwide growth in real income, the greater portion of which would occur outside the Organization for Economic Cooperation and Development."
Now that the carbon tax has returned to the "pending" file, it rejoins other EC-created issues for the oil industry: a working time directive that could be steamrollered through approval at an EC council meeting June 24 and the long term possibility of creation of a strategic oil reserve.
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