The European Union is considering a change to its energy tax policy that could make renewable fuels cheaper than fossil fuels, according to a Reuters report.
The proposed policy change would affect $294 billion in current energy taxes, and would be phased in from 2013 to 2018.
Two significant changes would be implemented: the tax would be based on the amount of energy content in a given volume of fuel, and a tax on carbon dioxide would be included. Currently, energy taxes are based solely on fuel volume, not energy density.
According to the report, the potential carbon tax would fall between 4 to 30 euros per ton of CO2. But exemptions might be carved out for farmers, and for heavy industries that compete with overseas firms that do not face carbon restrictions.
Currently, coal is the least taxed energy source under E.U. policy, while bioethanol is one of the highest.
Several E.U. countries already have their own carbon tax policies, but the political union has resisted attempts to institute blanket changes to energy taxation policies. Changes may be possible now, however, as Europe looks for ways to raise revenues in order to bail out faltering economies like Greece, Spain and Portugal, without increasing already unpopular austerity measures.
Although member nations have traditionally resisted attempts by the E.U. to wrestle away control of energy policy, such attempts have a greater chance of succeeding now that the financial crisis has increased the need for international cooperation and revenue generation, according to the article.
The proposal is set to be discussed June 23rd.