EU mulls energy efficiency tax breaks

HONOR MAHONY

11.06.2008 @ 17:21 CET

EUOBSERVER / BRUSSELS – The European Commission is to look into measures to help poor people affected by the high oil prices but is warning that a lifestyle change is needed from citizens to deal with the price hikes, which are here to stay.

Brussels on Wednesday (11 June) said it would ask EU leaders, meeting next week for their annual summer summit, to take "targeted measures to help citizens that are hardest hit by the current situation".

• Print
• Comment article

But it stressed that the main response must come in the form of energy efficiency, both in private households and in business, so that Europe's dependency on imported fossil fuels is gradually decreased.

"Rising fuel prices are squeezing the purchasing power of all EU citizens, with the strongest impact on the lowest-income families in Europe," Commission President Jose Manuel Barroso said in a statement.

"I believe that through a structured response at the EU level -- possibly combined with targeted social policy measures by member states -- we can meet the challenge," he added. "We need to save energy, and to diversify the sources of supply."

The commission said that oil prices - at their highest level since the end of the 1970s - are not a temporary phenomenon but "part of a structural shift."

It notes that while there are some temporary factors to explain the recent price hikes such as problems with certain pipelines and capacity to extract oil from its source, the main reason is due to change in oil supply and demand, with huge appetite for the energy source in China and India.

Rise in dependence on external energy sources

Brussels suggests that by 2030, global energy demand could be 50 percent higher than at the moment and says that if far-reaching environment proposals agreed by EU leaders last year are not actually implemented by 2020, as foreseen, then dependency on external energy sources will rise to 67 percent by 2030.

The commission's reaction comes as many member states have been hit by fuel demonstrations. Lorry drivers are currently protesting in Spain, Portugal and France at diesel prices which they say have risen by over 20 percent this year. Meanwhile, Spanish and French fishermen have taken to the streets for the same reason.

According to Brussels figures, household heating fuel costs have risen 35.2 percent in the EU over the year from last April while transport fuel is up 12.7 percent.

Mr Barroso is to present a paper on the energy situation at the EU summit next week. The study will also look into impact on fisheries, agriculture, transport, chemicals, automobile and renewable energy sectors.

A Robin Hood tax?

Referring to "Robin Hood taxes", a commission spokesman said that the executive would carefully consider the possibility of taxing profits from energy company to redistribute to those hardest hit by the price rises. Energy companies have strongly benefited from the rise in oil prices.

But he added that while there is a "case to look at the situation", it should not interfere with "businesses' capability to make the necessary investments in order to guarantee steady supply."

Any suggestions by the commission on the use of tax incentives, including reduce VAT rates, to encourage energy savings will be made after the summer.

Brussels also renewed its commitment to fully adopt legislation on its 2020 targets for renewables, biofuels and greenhouse gas reductions by the end of this year.