Energy Taxation Abroad
49. The written evidence from DTI and DETR stated
that "seven of our EU partners have introduced explicit taxes
on the carbon or energy content of fuels and the Italian Government
proposed a carbon dioxide tax in its last budget".
Several of the energy-related taxes introduced abroad were drawn
to our attention by witnesses, 
and we asked the Parliamentary Office of Science and Technology
to supply us with an analysis of such taxes in operation in other
The Energy Intensive Users Group noted that the proposed German
tax would add far less to the costs of energy intensive industries
than the UK proposal.
The Chemical Industries Association explained that the German
tax combined a reduced rate for energy intensive industries with
a cap on the net payment individual firms could make equal to
120% of their equivalent of employers' NICs.
The Association also mentioned the Dutch experience, where negotiations
are continuing about the possibility of energy intensive firms
being exempted from further energy taxation if their plants perform
to world class energy efficiency standards.
The British Retail Consortium commended a Californian scheme,
whereby firms are taxed on energy consumed in excess of a benchmark
figure calculated according to sector and based on the square-footage
of the site operated.
The Energy Intensive Users Group was concerned that "very
little attention [seems to have] been paid to what is going on
in other countries".
When asked about the German energy tax, Mr Meacher could only
tell us that it was "horrendously complicated" and that
he did not know the full details of it.
The Government needs to be aware of, and make use of, the best
practice of other countries in relation to energy taxation, not
least to help uphold the international competitiveness of UK firms
once the Levy is introduced.
The Way Ahead
50. The Energy Intensive Users Group argued
to us that, with regard to the Levy, "the whole process of
consultation is too short" and that the Government had moved
forward with "undue haste".
Lord Marshall, however, countered that "to give two years'
forewarning" of the Levy was very good.
The Government must work hard to allay the fears of much of UK
industry that the Levy will harm competitiveness, but we do not
believe that delaying the introduction of the Levy beyond 2001
would be helpful, either in terms of ensuring that the UK meets
its Kyoto target or providing the long-term signal to industry
that energy efficiency must be taken seriously. Ms Hewitt announced
to us that she had "invited representatives of the major
energy intensive sectors to meet Michael Meacher, John Battle
and myself at the Treasury on 27 July" to allow industry
representatives to speak directly to ministers about the on-going
negotiations between industry sectors and DETR about energy efficiency
We hope that the forthcoming meeting between Ministers and
industry representatives, announced for the first time at, and
possibly in response to, the Committee's evidence session on 6
July, will mark a new approach by the Government to its consultations
about the introduction of the Levy. We expect the Government
to work closely with industry to achieve energy efficiency gains
which do not harm, and indeed might improve, the international
competitiveness of industry the "win, win" situation
Ms Hewitt mentioned to us.
Recent actions by the Government, particularly the decision, taken
without consultation to recycle almost all the revenues of the
Levy by cutting employers' NICs, have raised serious concerns
about the effect the Levy might have on energy intensive sectors
of the British economy.
175 Apps, p11 paragraph 12 Back
Ev, p69; Apps, p60 Back
Apps p23 paragraph 5, p38 paragraph 13, p57; C&E response
from the Engineering Employers' Federation p3 Back
Q214; and see Apps, p74 Back
Ev, p2 section 4 Back
Ev, pp1-2 section 3 Back
Ev, p75; Apps, p8 on France, pp19-20 paragraphs 8-10, p28 paragraph
4.2; C&E responses from the British Lime Association paragraph
2.3, the UK Steel Association paragraph 2.2, British Energy on
Memorandum from POST (Appendix 56) Back
Qq54, 64 Back
Apps, p6, pp19-20 paragraph 6; and see Apps, p36, pp50-1 paragraph
2.1; C&E response from the Chemical Industries Association
annex B for detail; and unprinted memorandum from Lanstar Ltd Back
Apps, p8 Back
Ev, p58 section 11; C&E response from Tesco, p4; and see Apps,
p73 paragraph 6 which advocated a tax based on benchmarking Back
Q58; and Apps, p74 Back