European governments on Monday adopted new laws on energy taxation, but with many consumer-friendly exemptions. A proposal to broaden the scope of existing energy taxation laws to include all energy products, not just mineral oils as is now the case, was unanimously adopted by ministers at Monday's environment council in Luxembourg.

The new directive will see all other uses of coal, gas and electricity subjected to minimum tax rates across Europe. Member states will be able to offer companies tax breaks if they work to reduce their energy emissions. The new law will come into effect on January 1st 2004. The European commission is now pushing for transitional arrangements in the accession countries, due to join the EU in May 2004.

"The directive will improve the functioning of the internal market and help to meet the environmental objectives of the Kyoto Protocol", said internal market commissioner Fritz Bolkestein. And in a further bid to meet Kyoto targets, renewable energy sources will not be affected.