Europe: staying green?

As the oil price reaches record levels at a time of general economic slowdown, protests are spreading across Europe like wildfire. Spanish truck drivers are threatening a strike and the country's taxi drivers are also planning protests this Sunday.

The demonstrations and blockades by workers in petrol-reliant sectors, including farmers, truck and taxi drivers and fishermen, have echoes of the Europe-wide protests in 2000. Those protests caused considerable economic disruption and exposed the vulnerability of many governments. France has been the main focus for protests so far, but fishermen in Italy, Spain and Portugal, lorry drivers in Bulgaria, the UK and the Netherlands, and dairy farmers in Germany, Switzerland, and Austria have also demanded lower energy prices or other support.

Rises in energy prices may prove economically and environmentally beneficial in the longer term, incentivising consumers and producers to adapt their behaviour and invest in alternative sources. Yet the risk of short-term political unpopularity puts pressure on governments to provide succour for households and businesses.

Most of the ideas revolve around lightening the tax burden. French President Nicolas Sarkozy has suggested a cap on fuel tax. The Austrian government has approved additional tax breaks for fuel-related expenses. The UK government is likely to push back a rise in excise duties planned for the autumn, a measure originally designed as a 'green tax'. Yet the European Commission warns that such measures may be counterproductive, and possibly illegal. All this means that green policies may be dumped or temporarily discontinued for political expediency.