The objective of the study just published by the European Commission is twofold: first to analyse how the implementation of the EU energy tax policies will affect the EU and its Member States and secondly to analyse how energy tax policies can contribute to climate policy objectives in the enlarged EU.

The study evaluates the economic and environmental impacts of alternative energy tax policies in the EU in the context of an applied general equilibrium model (GEM-E3).

It develops scenarios in which EU energy tax policies are combined with various climate policy instruments and analyses the impacts of these scenarios at both macro-economic and sectoral level. The results are given for the EU as a whole and separately for each EU-22 Member State (the economic model used does not cover three small Member States).

The results indicate that the Member States would benefit from common energy/ carbon tax policies in the form of higher employment and welfare in the case they use tax revenues to reduce the employers’ social security contributions. A common EU carbon tax would be the most cost-efficient way of reaching the EU climate policy objectives. However, it would have a somewhat negative impact on the competitiveness of certain energy-intensive sectors. These effects would be alleviated only slightly by exempting energy-intensive sectors form energy taxation.