The implementation of an effective policy to address the climate changes that can derive from emissions of CO2 and other greenhouse gases is certainly a global task, that can be tackled adequately only at the world level. An unilateral action by the EC would not solve the greenhouse problem, whose nature is global. As a matter of fact, the Community contribution to total CO2 emissions is only 13%, compared to 23% for the US, 5% for Japan and 25% for Eastern Europe and the former USSR. But in 1993, with the completion of the Internal Market, the EC will become the biggest economic and commercial entity in the world. As such, the Community seems obliged to take the lead in relation to the protection of the environment and the sustainable use of natural resources, according to the political commitment contained in the declaration "The Environmental Imperative" adopted by the Heads of State and Government at the European Council in Dublin in June 1990. In this way the EC, having played a decisive catalytic role

for the adoption of a Convention on Climate Change at the UNCED Earth Summit in Rio in June 1992, seems obliged to show its capacity to carry out an effective policy for curbing greenhouse gases emissions. In this perspective a quite important step forward is represented by the Draft Directive proposed by the Commission, in the framework of a global strategy to limit the greenhouse effect, to implement a new energy/carbon tax. Taking into account the large uncertainty still surrounding, at the scientific level, the possible effects arising from global warming, the Commission has rightly privileged, in the definition of the strategy, the choice of a "no-regret policy". The main purpose of the new tax is really twofold: first, it is targeted to raise energy efficiency (15-25% gains can be easily obtained according to the existing techniques); secondly, it should promote a switching of energy demand towards fuels emitting less carbon dioxide -for instance through a substitution of natural gas to coal and, alt

hough to a lesser extent, to oil in power generation. The Commission proposal is in favour of a balanced solution, 50% of the tax being modulated according to the carbon content to promote fuel switching towards less polluting energy sources and the other 50% being modulated according to the energy content to promote energy efficiency, without providing excessive incentives to the use of nuclear energy, that has other negative effects from an environmental viewpoint. The macroeconomic impact of the tax, starting with a rate of 3$ in January 1993 and increasing each year up to 10$ in the year 2000, would be negligible, especially due to the revenue neutrality of the tax as well as to its gradual implementation. According to the DRI estimates in the Community as a whole there might be a small reduction in the annual growth rate during the period up to the year 2000 (between 0.05 and 0.1 percentage points) and a temporary increase in the rate of inflation (0.3-0.5% per annuum). It remains to be addressed the pr

oblem of energy-intensive industrial sectors largely open to international trade. If the new tax is implemented unilaterally by the Community and analogous measures were not carried out from competing industrial countries, the competitivity loss by the European firms in these sectores could bring about a delocation of industrial activities towards countries where this tax is not charged, with negative economic effects, but mostly with adverse environmental effects. In these countries it can be reasonably assumed that the level of energy efficiency is lower than within the Community. Consequently, following the implementation of the new tax within the EC, total CO2 emissions couls also increase. The Commission's proposal includes a general conditionality clause, that provides for implementing effectively the tax only if measures with an analogous financial impact will be carried out in the other OECD countries. As far as competition by other non-OECD countries is concerned, the Commission has proposed a part

icular fiscal regime, providing for partial tax exemptions in favour of the energy-intensive sectors if they engage in voluntary agreements to limit CO2 emissions so that the stabilisation target could be achieved. This energy/carbon tax should be introduced through a Community Directive in order to avoid possible distorsions within the Internal Market, but it will be implemented at the national level according to the principle of subsidiarity and the tax revenue will accrue to the national Exchequers. A key characteristic of the tax will be its revenue neutrality. This means that it should not result in any increase in total tax burden: the additional tax revenue needs to be offset by fiscal incentives and by tax reductions. This shift of the burden of taxation away from distortionary taxes on companies and individuals and towards taxes on exhaustibles resources will represent a first step for shaping a taxation system more efficient and in the same time more friendly towards the environment and a sustain

able development. The taxation of natural resources backed by a reduction in the tax burden on labour and on capital formation could also promote through adequate incentives savings and employment, while being more friendly towards the environment. As far as the use of the revenue is concerned, alternative possibilities should also be examined. First, it should be carefully analysed the idea put forward by the Italian Environment Minister to assign 60% of the tax revenue to the national budgets, but earmarked for funding investments that promote energy efficiency improvements; 20% to the Community budget for coping with the needs of the Delors-II package; and 20% to a World Fund for the financing of technology transfers towards Third World countries and Eastern Europe in the framework of a global policy to limit CO2 emissions and to improve energy efficiency. The Commission recently has supported the proposal put forward by the Argentinian and Brazilian governments for a global carbon tax equivalent to $1

per barrel of oil, whose proceeds would go to developing countries to help them install energy-efficient and environmentally friendly technology. With such a tax a revenue could be raised amounting to around 25 billions dollars, that could substantially enhance the flow of funds targeted to promoting sustainable development also in Third World countries. If the Community will be able to engage itself to give up a part of the revenue of the energy/carbon tax to finance a world fund for the environment, this will be a decisive step for fostering the implementation of the Argentinian-Brazilian proposal in the follow up of the Rio process . It is important to underline two positive effects of the proposal to use the revenue of the energy/CO2 tax to finance the Community budget. First, it could offset the lack of an effective stabilisation policy at the Community level, since this tax has good automatic stabilisation properties, energy consumption varying without any significant time-lag with the change in eco

nomic activity. The tax will diminish if the European economy enters into a recession and increases during a boom. Secondly, a Community budget financed mostly thorugh the VAT and an energy tax seems to comply largely with the requirements of a modern fiscal reform. In the economic literature the idea is prevailing that a good fiscal system must levy high taxes on consumption -to promote savings in a situation of the world economy where the demand for investments largely exceeds the supply of funds- and on the use of scarce natural resources -to promote sustainable development. A good exemple of this kind of fiscal reform is the Swedish one, where a large reduction in income tax revenue -to encourage savings and employment- has been financed by an increase of taxes on consumption and energy. Another important point regards the institutional development of the Community. The proposals included in the Delors-II package, have been criticised by many member States, obliged to provide larger amount of funds to

finance the Community. One possible solution is to recognise, following the basic principles of fiscal federalism, an autonomous taxation power to the Community, involving in the process of decision-making the two branches of the budgetary authority -the Council and the European Parliament. In this way political and social forces will have the possibility to step in the process of defining the fiscal policy carried out by the Community, that will be entitled to increase expenditures only if it will be able to get a sufficient consensus by the Community citizens to reduce other expenditures or to increase the tax burden. The possible use of the energy/CO2 tax as a new own resource for financing the Community budget would obviously strengthen the need to promote a further institutional reform of the EC, so that the democratic deficit that still remains following the Maastricht agreements could be overcome. As far as the European Parliament is concerned, reversing the slogan of the American revolution, this pr

inciple could be adopted: "No representation without taxation"! As a matter of fact, the recognition of an autonomous power of taxation has played a major role in the development of all the parliamentary democracies. In conclusion, the need of strenghtening the democratic institutions of the Community appears the more urgent task, with the consciousness that the achievement of this goal represents the decisive element permitting to the Community to promote sustainable development and to play a positive role for defining a new world order capable to guarante peace, justice among the people of the world and environmental protection.