A counterproductive natural gas tax

The fact that the current state of Greece?s finances is worse than it has even been in the post-World War II era is common knowledge.

Political parties and experts have suggested and continue to suggest solutions to reverse this trend. Yet every time, the government opts for the easiest solution: indiscriminately imposing new taxes without quantifying the consequences on the economy and society. The special consumer tax imposed on natural gas is one such example. The shortsighted manner in which this was done has provoked a string of problems throughout society and the economy, bringing consumers and the sector to a state of agitation and despair.

In the mid-1990s, the state urged many thousands of households and businesses to use natural gas, touting it as the most environmentally friendly and compatible form of fuel.

Consumers spent a great deal of money on replacing their old appliances, in the belief they would pay lower energy bills, while also contributing to reducing environmental pollution from the use of fossil fuels. At the same time, the green light was given to the Public Power Corporation and new energy providers to install modern natural gas units. Today, 23 percent of Greece?s electrical energy is produced with natural gas and the trend is rising. Hundreds of businesses across the country now use natural gas and among these are industries that are heavily dependent on energy and whose output contributes to the economy?s competitiveness and well as the country?s exports.

It goes without saying that the abovementioned tax on natural gas will curb the popularity of this form of energy with households, while it will also put an unnecessary burden on all natural gas consumers, given that the revenue — of no more than 150-200 million euros — expected to be incurred cannot offset the obvious negative effects it would have on the economy.

Already the tax has also affected energy production, making the wholesale energy export market even more problematic than it was. Meanwhile, the additional cost of the tax will without doubt be passed on to the consumer by increasing the price per kilowatt-hour as it is impossible for suppliers to absorb the cost of the tax themselves without suffering major losses. It goes without saying that the number of unpaid bills will inevitably begin to mount and ultimately to reverse the trend in the energy market for more green energy, which the government and the prime minister have hailed as being the ultimate hope for economic recovery through investments in this area.

The government must take action to reverse this gloomy set of consequences. First of all, it needs to examine whether the benefits of imposing the levy are greater than the damage it would do to the broader economy. If it then decides to continue with the tax, it must take measures to counterbalance the negative consequences, something that it should have done before imposing the levy in the first place.

If the government does neither of the above, the damage from the natural gas tax will become irreversible, and no one knows where this could lead.

* Theodore C. Panagos is the former vice president of the Energy Regulatory Authority and New Democracy?s deputy for energy and natural resources.

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