Work
10.November 2009 - 00:00
Windfall tax
On 31 March 2009, the Finnish Government adopted a policy on cutting unearned profits from emissions trading. The Government announced that so-called windfall profits would be cut by means of a tax payable to the State, the revenue from which would be used for general expenditure. The tax would be levied on hydro power and nuclear power generation from capacity built before 1997, the year in which the Kyoto Protocol was adopted. It would not be levied on wind power, small hydro power or combined heat and power production. Moreover, the government's draft is based on the assumption that no tax would be levied on industry's use of its own electricity or on electricity supplied to shareholders in a generating company.
EU Directive 2003/87/EC(1) establishing a scheme for greenhouse gas emission allowance trading (the ‘Emissions Trading Directive’) and Directive 2009/29/EC(2) improving and extending it stipulate inter alia that:
— the Community and its Member States will fulfil their commitments through an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment (Directive 2003/87/EC, Recital 5);
— emission allowance trading should form part of a comprehensive and coherent package of policies and measures implemented at Member State and Community level (Directive 2003/87/EC, Recital 23);
— the objectives of eliminating distortions to intra-Community competition and of ensuring the highest degree of economic efficiency in the transformation of the Community economy towards a safe and sustainable low-carbon economy make it inappropriate to treat economic sectors differently under the Community scheme in individual Member States (Directive 2009/29/EC, Recital 17).
Does the Commission consider that the aforementioned Finnish Government policy on taxing forms of energy which do not release any emissions (hydro power, nuclear power) accords with the Emissions Trading Directive and the coherent promotion of emission-free forms of energy which is its objective?
From the point of view of the Emissions Trading Directive, does the Commission consider it right to place emission-free generation in a different position on the electricity market, for instance on the basis of the time of construction of generating capacity, its location or the emission-free technology chosen? What combined effects does the Commission anticipate arising from the point of view of the undistorted operation of emissions trading and the internal market, the maintenance of emission-free generation and investment if in addition to Finland other Member States also begin to tax various forms of emission-free electricity generation?
(1) OJ L 275, 25.10.2003, p. 32.
(2) OJ L 140, 5.6.2009, p. 63.
Answer given by Mr Dimas on behalf of the Commission
As stated in Recital 23 of the Emissions Trading Directive (2003/87/EC(1)), emissions allowance trading should form part of a comprehensive and coherent package of policies and measures implemented at Member State and Community level. Without prejudice to the application of Articles 87 and 88 of the Treaty, where activities are covered by the Community scheme, Member States may consider the implications of regulatory, fiscal or other policies that pursue the same objectives.
As regards the tax imposed by the Finnish government on the profits of operators of nuclear and hydro-power stations, in the absence of harmonisation in the field of direct taxation, Member States are free to lay down national provisions for these types of taxes. However, these have to be in line with the general principles of the EC Treaty and in particular respect the non-discrimination principle.
(1) Directive 2003/87/EC of the Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, OJ L 275, 25.10.2003.
On 31 March 2009, the Finnish Government adopted a policy on cutting unearned profits from emissions trading. The Government announced that so-called windfall profits would be cut by means of a tax payable to the State, the revenue from which would be used for general expenditure. The tax would be levied on hydro power and nuclear power generation from capacity built before 1997, the year in which the Kyoto Protocol was adopted. It would not be levied on wind power, small hydro power or combined heat and power production. Moreover, the government's draft is based on the assumption that no tax would be levied on industry's use of its own electricity or on electricity supplied to shareholders in a generating company.
EU Directive 2003/87/EC(1) establishing a scheme for greenhouse gas emission allowance trading (the ‘Emissions Trading Directive’) and Directive 2009/29/EC(2) improving and extending it stipulate inter alia that:
— the Community and its Member States will fulfil their commitments through an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment (Directive 2003/87/EC, Recital 5);
— emission allowance trading should form part of a comprehensive and coherent package of policies and measures implemented at Member State and Community level (Directive 2003/87/EC, Recital 23);
— the objectives of eliminating distortions to intra-Community competition and of ensuring the highest degree of economic efficiency in the transformation of the Community economy towards a safe and sustainable low-carbon economy make it inappropriate to treat economic sectors differently under the Community scheme in individual Member States (Directive 2009/29/EC, Recital 17).
Does the Commission consider that the aforementioned Finnish Government policy on taxing forms of energy which do not release any emissions (hydro power, nuclear power) accords with the Emissions Trading Directive and the coherent promotion of emission-free forms of energy which is its objective?
From the point of view of the Emissions Trading Directive, does the Commission consider it right to place emission-free generation in a different position on the electricity market, for instance on the basis of the time of construction of generating capacity, its location or the emission-free technology chosen? What combined effects does the Commission anticipate arising from the point of view of the undistorted operation of emissions trading and the internal market, the maintenance of emission-free generation and investment if in addition to Finland other Member States also begin to tax various forms of emission-free electricity generation?
(1) OJ L 275, 25.10.2003, p. 32.
(2) OJ L 140, 5.6.2009, p. 63.
Answer given by Mr Dimas on behalf of the Commission
As stated in Recital 23 of the Emissions Trading Directive (2003/87/EC(1)), emissions allowance trading should form part of a comprehensive and coherent package of policies and measures implemented at Member State and Community level. Without prejudice to the application of Articles 87 and 88 of the Treaty, where activities are covered by the Community scheme, Member States may consider the implications of regulatory, fiscal or other policies that pursue the same objectives.
As regards the tax imposed by the Finnish government on the profits of operators of nuclear and hydro-power stations, in the absence of harmonisation in the field of direct taxation, Member States are free to lay down national provisions for these types of taxes. However, these have to be in line with the general principles of the EC Treaty and in particular respect the non-discrimination principle.
(1) Directive 2003/87/EC of the Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, OJ L 275, 25.10.2003.