WRITTEN QUESTION E-0944/00

by Jens-Peter Bonde (EDD) to the Commission

(29 March 2000)

Subject: Renewable energy

Will the Commission say what progress it has made in assessing the Danish Government's plans to introduce renewable energy coupons? Consumers will apparently be compelled to buy renewable energy coupons in proportion to their consumption of electricity, which is a new form of taxation in all but name. Does the Commission consider that these coupons are a tax on Danish consumers?

Will the Commission also say whether the CO2 levy on windmills, which are normally CO2 free, is consistent with current EU rules?

Answer given by Mr Monti on behalf of the Commission

(10 May 2000)

The Commission is about to complete its assessment of the Danish Government's plans to introduce so-called renewable energy (RE) certificates for electricity based on renewable energy sources. A decision should be ready in the near future.

The system with regard to RE certificates is as follows. Producers of electricity from renewable energy sources will receive a number of RE certificates representing their total production. Consumers will be obliged to buy RE certificates representing a certain share of their total electricity consumption. Producers of the more expensive RE-based electricity are thereby sure to receive compensation over and above the market price for electricity. The price of the certificates ranges between DKK 0,10 and DKK 0,27 per kilowatt-hour (kWh) electricity they represent. The obligation to buy certificates will raise the total amount on electricity bills for consumers, which the Honourable Member compares to a new form of taxation in all but name. The Commission notes that the money paid for the certificates will not go to the state budget, and therefore does not constitute a tax. It is more like a parafiscal levy, money raised in order to finance a particular project or objective and thus benefitting certain companies, in this case electricity producers using renewable energy sources. The Commission would like to point out that currently producers of RE-based electricity in Denmark receive direct state subsidies, financed from tax revenue.

Moreover, the fact that a measure has an effect similar to a consumption tax does not itself have an impact on the Commission's assessment of the effects of a measure on competition and the functioning of the internal market. It is only when such a measure is not applied in a uniform manner, so that it favours certain undertakings or the production of certain goods, that the Commission can intervene with reference to Article 87(1) (ex-Article 92) of the EC Treaty.

The Danish carbon dioxide (CO2) tax on fuels and electricity relates to the CO2 content of the fuel. For electricity, the tax rate relates to the CO2 content of coal, since most power plants in Denmark are coal-fired. With a tax rate of DKK 100 per ton CO2 emitted when electricity is generated from coal, the tax for electricity is DKK 0,10/kWh. Currently, windmills and other RE-based power plants, which emit no or very little CO2, receive a grant of the same amount as a compensation for the tax. During the coming years, these grants will be replaced by the minimum price of the RE-certificates, which is also DKK 0,10/kWh. In this way it is ensured that the power plants concerned continue to be compensated for the CO2 tax.