Biodiesel tax hurts Labour's image

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The credibility of Norway’s Labour Party on environmental issues suffered another blow this week, when it continued to promote a new tax on biodiesel fuel. It now seems the tax is likely to be approved by Parliament, despite strong protests from Labour’s own government colleagues and major players within the alternative energy industry.

“What’s next, a tax on sunbeams perhaps?” mused one industry leader on Norwegian Broadcasting (NRK) Friday morning. He and others claimed investors will drop projects like those related to bio-fuels because of fear for new taxes.

The sheer unpredictability of government policy means it will be “impossible” to raise funds for investment in new projects, if they risk being hit by new taxes and fees that will hinder their profitability.

Investor Jens Ulltveit Moe, long a captain of Norwegian industry, believes the Labour Party is more concerned about finding new sources of government revenue than it is in the environment. “Extremely disappointing,” he told NRK.

Others have said the biodiesel issue has led to a “confidence crisis” between the government and everyone working towards development of renewable energy.

Unworthy champion

Labour likes to portray itself as an environmental champion, but the biodiesel proposal is seen as another example of its support for the oil industry and the jobs it creates, plus its lust for tax revenue. Labour also has refused to go along with a ban on drilling off Norway’s scenic northern coast, and has proposed opening more sensitive areas of the Arctic to oil exploration. It has refused to intervene in Statoil’s investment in a controversial oil sands project in Canada and most of the government’s climate emissions cuts are being conducted through programs overseas, not at home in Norway where the oil industry leaves emissions sky-high on a per capita basis.

Labour’s own new Finance Minister, Sigbjørn Johnsen from rural Hedmark County, earlier has been a leading proponent of biodiesel fuel. Suddenly he had to change his tune this week, going along with the party line and also arguing that committing land to raise crops for fuel can threaten food production. Not even Labour’s government partner, the farmer-friendly Center Party, seemed willing to buy that argument.

It’s reluctantly going along, though, with the proposal to remove the current tax exemption on biodiesel fuel. Half the exemption stands to be removed next year, and all of it in 2011. That will make biodiesel much more expensive at the pump, while Transport Minister Magnhild Meltveit Kleppa from the Center Party haltingly tried to explain in Parliament that the tax revenues will be used to improve Norwegian roads.

Averting huge fuel tax losses

Newspaper Dagens Næringsliv (DN) reported this week that Labour Prime Minister Jens Stoltenberg was pushing through the biodiesel tax for fear of huge tax losses if biodiesel actually were to win a large share of the fuel market in Norway. If motorists move over to biodiesel, the state could lose as much as NOK 16 billion in fuel tax revenues a year, according to DN.

Stoltenberg argued that “polluters pay” in Norway, and that biodiesel also can contribute to pollution. He also noted the overall tax on biodiesel will still be lower than on other fuels.

Frederic Hauge of environmental group Bellona has called the loss of biodiesel’s tax exemption a “shame” for Norway and worries that participants at the upcoming UN climate talks in Copenhagen will now brand Norwegians as a bunch of “petroholics.”