Meeting for three days under the Presidency of Finnish Environment Minister Jan-Erik Enestam, Environment Ministers from the EU, candidate countries, the European Free Trade Association and the European Economic Area agreed on the need to improve eco-efficiency in addressing global environmental problems but disagreed on a greater use of taxation as a key driver.

The Ministers warned that globalisation - and especially economic growth in the emerging economies of Asia and South America - is radically reshaping our economies and the conditions for environmental policies. On energy, t he steady increase in energy demand, dependence on fossil fuels and a constant reduction in vital natural resources were viewed as major challenges for the European Union. “Globalisation demands fairer natural resources and the promotion of more environmentally friendly modes of production and consumption”, they concluded. Moreover, “more sustainable use of resources can improve the competitiveness of EU companies on the global market and reduce Europe’s dependency on imports of raw materials, whilst reducing harmful impacts on the environment”, according to the Presidency’s conclusions.

Ministers also expressed impatience to see an EU action plan on sustainable consumption and production, including targets. Environment Commissioner Stavros Dimas reaffirmed the Commission’s promise to issue such a plan by 2007. Finnish Environment Minister Enestam called for this to lead on to an EU eco-efficiency strategy based on material and energy efficiency targets.

More environmental taxes were suggested by both the Presidency and the European Commission as an important market instrument to drive resource efficiency. Cooperation between countries would limit the industrial impact of such a tax shift, according to an OECD report published in July. The report says t here is great potential for wider use of these environmental policy instruments, provided that they are well designed and that their potential impact on international competitiveness and income distribution are properly addressed. In practice, environmental taxes have been in decline (as a share of GDP and of total taxation in the EU) and both the UK and Ireland raised objections to the idea.

EWEA generally welcomed the conclusions of the Environment Ministers’ meeting, pointing out that decoupling resource use from economic growth is crucial but increasingly irrelevant when it comes to energy. It is becoming clear that reducing fossil fuels, while increasing the role of indigenous renewables, is a precondition for economic growth. As the world leader in renewable technologies, Europe is in a unique position to turn the energy and climate challenge into an opportunity. Europe’s growth potential is not threatened by renewables. It is threatened by continuing the current supply structure, with a larger share of imports at unpredictable prices from a few countries and in competition with the US, India, China and Japan.

EWEA is concerned, however, that environmental tax policies received such resistance. Adapting market prices to incorporate all costs and benefits related to the different energy technology options (including environmental impacts and use of natural resources) is the best guide to rational investment decisions. Current energy supply systems rely to a great extent on finite primary fuels, both fossil and uranium. The very limited internalisation of external costs in electricity prices, and the failure to include full life-cycle costs for the nuclear cycle, constitute a market failure which puts renewable electricity production at a competitive disadvantage.