ANALYSIS - EU coal, diesel subsidies clash with green ideals
Date: 07-May-02
Country: EU
Author: Robin Pomeroy
Environmental campaigners are fuming at a deal among EU member states last week which ensured Germany will be able to continue its multi-billion euro annual handouts to coal mining, in return for allowing other countries to subsidise truck fuel.
"This shows the imbalance between government rhetoric on making a great leap forward in the environment and the reality," said Rob Bradley of Climate Network Europe, a group campaigning for policies to halt global warming.
France, Italy and the Netherlands gave tax breaks to hauliers in response to truckers' protests at soaring fuel prices in 2000 when oil was trading at around $30 a barrel - subsidies the European Commission said were illegal.
The Commission, the EU's executive arm, has told Germany to phase out its coal aid completely by 2010 because such subsidies distort the bloc's single market.
Member states banded together to override the Commission's misgivings in a trade-off which satisfied a range of their own national interests but left a major question mark over the bloc's environmental priorities.
Under the United Nations Kyoto treaty on climate change, the EU must cut its greenhouse gas emissions by eight percent of 1990 levels by the end of the decade. Most of those emissions come from burning fossil fuels for energy and transport.
SECURE ENERGY SOURCE
Germany insists its coal aid - which peaked at 11.3 billion marks (5.78 billion euros) in 1989 and is 5.7 billion marks this year - protects jobs and secures a key energy source, even though emissions from coal are far higher than from oil or gas.
"World oil and gas resources are expected to last for another 30-50 and 60-100 years respectively, while coal will be there for several hundred years," said Franzjosef Schafhausen, head of the German government's Federal Climate Working Group.
"If you mine less coal in favour of gas and oil, you will find prices for those fuels increasing on the world market. We need to ensure security of energy supply."
But the European Environmental Bureau (EEB), a coalition of environmental campaign groups, decried the coal-diesel bargain.
"We really regret that governments do such deals," said Sylvain Chevassus, the EEB's tax campaigner.
"A lot of funds are being wasted on subsidies that are harmful to the environment. The money could be used in a more efficient and coherent way."
The EEB wants all environmentally harmful subsidies to industry, transport and agriculture phased out by 2005 and the money used for cleaner energy such as wind and solar, and social restructuring in rust belt areas.
A report by pressure group Greenpeace last year found that developed countries spend 10 times as much subsidising fossil and nuclear fuels as on renewables.
As well as cutting fossil fuel subsidies, the EEB wants governments to increase tax on non-renewable fuels and ease the blow on industry by reducing taxes on employment.
"Increasing environmental taxes and decreasing labour taxes - even the unions agree with that," Chevassus said.
HUGE DIFFERENCES
Plans for an EU-wide strategy on energy tax have been drawn up and shot down over the last 10 years as certain member states hang on to their sovereign rights on fiscal policy.
But at a summit in Barcelona in March, EU leaders said they wanted to adopt a Commission proposal on minimum tax levels for energy, as a counterweight to the liberalisation of gas and electricity markets, meant to bring down prices.
EU finance ministers are to discuss the proposal on Tuesday.
The Commission plan, dating from 1997, is to gradually raise EU-wide minimum tax levels on oil products, and introduce EU minima for the first time on coal, gas and electricity.
Initially, Spain strongly opposed the move, but it relented when Germany and France agreed in Barcelona to push ahead with energy liberalisation which Madrid wanted. All member states have the right to veto tax proposals.
As holder of the EU's