The European Commission is planning in the next couple of months to table a proposal for a carbon tax, a move likely to cause division among member states. EU Taxation Commissioner Algirdas Semeta plans to draft legislation on a minimum rate of tax on carbon emissions, as one of his priorities. Previous plans in 2008 to propose a carbon tax legislation, were shelved after it was deemed too divisive, especially in the context of the Irish referendum on the Lisbon Treaty.

Commissioner Semeta now is looking to calculate the tax according to how environmentally damaging the fuel is, with fuels emitting high level of carbon emissions taxed more heavily. Several EU Member States already have national carbon taxes, including Sweden, Denmark and Finland (since the 1990s). Ireland announced a carbon tax of €15 per tonne in December 2009. Germany, Slovenia, the Netherlands and the UK all have environmental taxes, but without an explicit CO2 component. France tried to introduce one but the country's top court last year struck down the attempt calling it unequal and counterproductive.

However, any EU-level proposal is likely to cause opposition among those member states who feel tax policies are the preserve of national governments. The UK has already voiced its opposition to the plan, which would need to be supported by all 27 member states (as all EU legislation in the taxation area requires the unaninous support of all EU Member States).

Previously a taboo, the idea of a direct European tax is now being mentioned more often. Jose Manuel Barroso raised the possibility in his political guidelines on the commission's work for the next five years, while EU Council President Herman Van Rompuy, before his took up his post, spoke about the need for "financial levies at European level." Sweden, an enthusiastic supporter of an EU-wide carbon tax, has already attempted to revive the idea during its EU Presidency last year, but could do little in the absence of a formal proposal from the Commission.

Supporters of the proposal argue that the current energy tax directive runs counter to the EU's climate-change goals. The directive places a higher tax burden on ethanol than coal, despite coal being a far dirtier fuel. It also discriminates against renewable energy sources, as they are taxed according to the conventional fuels that they replace.