Sweden, which has recently taken over the EU presidency, is attempting to convince its European partners to follow its example by instituting a carbon tax. A carbon tax would tax fossil energy fuels by reference to the CO2 emissions attributable to them. The proposed carbon tax will be separate from and in addition to the current EU ETS and is expected to cover sectors that are not covered by the existing system (such as transport, heating of buildings and agriculture). Having said this, there are significant exemptions from the existing Swedish regime such as an exemption for fuels used to produce electricity and an exemption for biomass.

Although an additional tax may be unpopular in the current economic climate, Sweden itself established a form of carbon tax on energy consumption in the early 1990s and it seems keen to encourage other member states to follow suit. Their proposal is likely to set a minimum level of taxation and leave member states free to decide the way they should levy tax at a domestic level.

The proposal is unlikely to secure the unanimous consent required to proceed, not least because most other EU countries have a very different energy production profile to Sweden, which produces a large proportion of its energy through nuclear, hydro and other renewable sources. However, it is a clear attempt to move the issue up the EU agenda and so the topic is likely to be the subject of more debate over the coming months.