Not a Europe for Old Fuels: a green proposal for the “Next Generation EU” project

Since late February 2020, Covid-19 has been challenging the European Union: restrictions, lockdowns and other restrictions have caused a new economic crisis, one whose consequences cannot be completely understood. However, the European Union has taken action against the pandemic. First of all, conditions that may allow Member States to financially sustain their national companies have been identified ¹ as an exception to the general prohibition of State aid²; moreover, the EU extended its Own Resources system, to be used to support the economy. In July 2020, the European Council reached an agreement about the “Next Generation EU” system, which allocates 750 billion euros to be used in order to support Member States and to drive them out of the crisis. The “Next Generation EU” project is based on three main pillars: supporting Member States with investments and reforms, kick-starting the EU economy by incentivising private investments, and “addressing the lessons of the crisis”, an enhancement plan of the fields which have been hardest hit, such as the health system and the Civil Protection sector.

What matters here is that each pillar is based on the green transition. The purpose of the changeover requires a sustainable economy that cannot be achieved without a “green” fiscal reform. The reform focuses on three different “steps”: a European carbon tax, the introduction of ecotaxes in each Member State, and the contextual reduction of environmental tax benefits. It is well known that a uniform carbon tax in the EU would help to attain the objectives of the Paris Agreement; moreover, the revenue it would generate would increase the Own Resources system with which the EU finances grants and loans for its Member States. National ecotaxes are also needed, in order to discourage polluting activities. Regarding tax benefits, a large number of them are subsidies which are harmful to the environment as they encourage the use of fossil fuels. For example, Italian tax laws provide that rates on diesel are lower than the rates on gasoline, which increases fuel consumption. Tax laws also provide that tax exemptions and reductions are applied on various means of transport; those benefits are not due to a lower environmental impact of the fuels, but instead they depend on the use of the vehicle (for example, taxi, armed forces’ vehicles). The loss of revenue associated to such causes is estimated at approximately 5.154,00 million euros.

Therefore, the implementation of a green tax reform must be complemented by a different policy on public transportation. Otherwise, no reductions to the polluting emissions would ensue and the only consequence of the fiscal reform would be the imposition of higher costs on those who rely on using cars to travel.

Finally, the interventions on public transportation costs should not be paid by Member States: since they are fully part of the “green transition” they should be covered by the “Next Generation EU” funds. In the case of Italy, EU funds could be channelled to i) encouraging ridesharing, in order to incentivise private vehicle replacement³; ii) financing alternative means of public transport. The use of rolling stocks powered by electricity, such as trams, could be an adequate solution: the fleet already in circulation would need to be adapted to modern technologies, more sustainable than the existing ones⁴, and the number of circulating vehicles should be increased, since the trams available are too few to satisfy all passenger needs ⁵.