The project will examine the economic principles that should govern the taxation of energy (domestic and industrial fuels and motor fuel) in the single European market, and will assess the range of effects (including effects on industrial competitiveness, environmental objectives, income distribution and public revenues) that would result from the adoption of various possible Community rules for the structure and level of energy taxes. Economic analysis of the general principles which should underlie the division of functions between the European Community and member state governments places considerable emphasis on the role of'spillovers' or 'externalities' arising from the policy decisions of member states. Drawing on this conceptual framework, the research would seek to identify the key issues in policy towards the taxation of energy, including those where significant spillovers would arise from the policy decisions of individual member states (e.g. effects on intra-EC competition, and cross frontier environmental impacts) and those where important, but largely domestic, considerations are involved (e.g. 'efficient' commodity taxation, revenue and distributional effects). The effects under each of these headings of various possible Community rules for energy taxation would then be quantified drawing both on existing research and available data, and, where appropriate, making use of tax policy simulation models for the UK and other member states being developed under a SPES project coordinated from IFS.