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The European Union is preparing to open a debate on a possible radical reform of its energy taxation system through a proposal defined by many as a “green capital tax”. This is an initiative that was promoted by Denmark, the rotating president of the Council of the European Union, aiming to introduce increasing excise duties on electricity and fuels, in order to align environmental taxation with the EU’s decarbonisation objectives.
FROM TAXES TO ECOLOGICAL TRANSITION
In recent years, the European Union has intensified the debate and actions in the fight against climate change, setting increasingly ambitious goals, such as reducing emissions by 90% by 2040 compared to 1990 levels. The proposal to revise the Energy Taxation Directive, already introduced in 2021 and now the subject of a decisive relaunch, fits into this context. The main objective is to incentivize the use of renewable sources and discourage the use of fossil fuels, through a tax mechanism that is in line with the dictates of the 2030 Agenda and the European Green Deal.
THE THREE ELEMENTS OF THE DANISH PROPOSAL
The proposal put forward by Denmark is based on three fundamental elements. First of all, a review of excise duties on energy, with the aim of adapting the taxation system to the new climate objectives, with particular reference to carbon neutrality and the transition to a sustainable economy. The aim would be the introduction of a new taxation criterion, no longer based on consumption volumes but on the energy content and environmental impact of energy sources. This change is meant to hit sources such as coal more severely. Consequently, fossil fuels would be penalized, trying to discourage their use through increasing taxation.
THE REGULATORY CONTEXT AND POLITICAL RESISTANCE
The new capital tax should be approved unanimously by the Council of the European Union, a condition that poses some political obstacles. Many Member States are, in fact, showing some resistance due to fears related to the economic effects on businesses and citizens, particularly in Eastern European countries, more dependent on fossil fuels and with less flexible energy systems. The request to unify the tax sector of countries that use different energy and industrial models and mixes represents a challenge that could also call into question the principles of fairness and solidarity on which the Union is founded, as well as the interference in national energy strategies.
DENMARK’S ROLE
It is not surprising that Denmark is the driving force behind this initiative. The Scandinavian country has been at the forefront of the fight against climate change for years, with very strict environmental policies. Starting in 2030, Denmark should be the first country in the world to apply a carbon tax on agricultural emissions, imposing a cost of 300 kroner (about 30 euros) for each ton of CO₂ produced by cattle, pigs and sheep. This measure, contested by breeders and farmers, represents a concrete example of an ecological taxation also applied to sectors normally excluded from environmental taxation.
PRESSURE FOR REFORM
Alongside institutional action, there is pressure from civil society. Many NGOs have signed an appeal to introduce new environmental taxes. The requests focus on the need to tax more incisively sectors such as air transport, the fossil fuel industry and international financial transactions. Large fortunes are also indicated as subjects to be included in a system of fiscal responsibility linked to the ongoing environmental crisis.
TRANSITION AND REGRESSIVE RISK
Of course, the main issue of the green wealth tax lies in the potential regressive impact that it could generate on the economies of the member countries. Excise duties on fuel and electricity tend to hit the less well-off social groups more, who dedicate a greater share of their income to energy consumption. To prevent the ecological transition from becoming a new form of social injustice, it would be necessary to provide compensation such as subsidies and incentives for energy efficiency, in addition to increasingly necessary refresher programs – or even professional reconversion programs – for all those workers employed in the sectors at risk.
BETWEEN AMBITION AND POLITICAL REALISM
The Danish proposal represents a position that is far too advanced towards a European environmental taxation. Its effective implementation is certainly linked to the ability to mediate between divergent interests and the political will of the member states. In this sense, we cannot forget that we are in a historical moment where international crises, the need to review industrial commitments and the internal needs of Member States will hardly give way to the debate on green capital tax. Especially if it is not accompanied by redistributive and mitigative measures, along with an open dialogue with citizens, so that the ecological transition does not turn into a new source of inequalities.