Reforming the EU Energy Tax Directive: Assessing the Options

36 Pages Posted: 14 Mar 2016

See all articles by Ian Parry

Ian Parry

International Monetary Fund (IMF)

Herman R.J. Vollebergh

PBL Netherlands Environmental Assessment Agency (Bilthoven); Tilburg Unversity ; CESifo Institute; Tilburg Sustainability Centre; Tilburg University - Center and Faculty of Economics and Business Administration

Date Written: February 11, 2016

Abstract

The efficiency case for raising fuel tax minima under the EU Energy Tax Directive (ETD) appears nuanced. Some fuels may be undertaxed (e.g., road diesel, natural gas), while others may be adequately taxed already (e.g., gasoline). Reform proposals would increase some minima, including for road diesel and natural gas, while leaving that for gasoline unchanged. This is a step in the right direction, though the climate, fiscal, health, and net economic benefits are limited. There are potentially much larger gains from extending tax minima to fuels (especially coal) covered by the EU Emissions Trading System (if the cap is tightened). Two-speed systems (with lower minima for low-income countries) may improve political acceptability, while sacrificing little in terms of climate benefits. Under higher, but still plausible, environmental damage assumptions than used here, there is a case for reviving ETD reform, whatever its exact structure.

Keywords: energy tax directive, climate, tax floor, efficiency

JEL Classification: Q540, Q580, H230

Suggested Citation

Parry, Ian and Vollebergh, Herman R.J., Reforming the EU Energy Tax Directive: Assessing the Options (February 11, 2016). CESifo Working Paper Series No. 5749. Available at SSRN: https://ssrn.com/abstract=2747273

Ian Parry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Herman R.J. Vollebergh

PBL Netherlands Environmental Assessment Agency (Bilthoven) ( email )

Bezuidenhoutseweg 30
Den Haag, 2594 AV
Netherlands
+31655736920 (Phone)

Tilburg Unversity ( email )

Tilburg
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/h.r.j.vollebergh.htm

CESifo Institute ( email )

Munich
Germany

Tilburg Sustainability Centre ( email )

P.O. Box 90153
Tilburg, North Brabant 5000 LE
Netherlands

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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