Spain to focus on fuel taxation

Spain’s prime minister, José Luis Rodríguez Zapatero, has told the FT that he will cut the budget deficit “whatever the cost”, but based on his actions so far, he appears to draw the line at environmental taxes.

Under Spain’s leadership, the European Union has sensibly called for member states to shift the tax burden from labour to energy and environmental taxes as part of a “greening” of taxation systems. However, this doesn’t seem to have taken much effect yet in Spain.

Current austerity plans in Spain are focused on rises in IVA/VAT, but there is not a single proposal concerning environmental taxes. The obvious place to start would be fuel tax. Spain has the lowest of any large Western European country. No surprise then that road transport emissions almost doubled between 1990 and 2007 while the rest of the EU’s grew by a more modest 20%. No surprise either that, at 2.1 tonnes of CO2 per head, road transport emissions per capita in Spain are higher than those in France, Germany or the UK.

Over the past five months 10 EU member states have raised fuel taxes. As holder of the presidency of the EU, should Spain be looking to fuel taxation as an opportunity to both curb its budget deficit and move towards more sustainable transport ?