WRITTEN QUESTION E-2750/00

by Hiltrud Breyer (Verts/ALE) and Alexander de Roo (Verts/ALE) to the Commission

(1 September 2000)

Subject: Tax exemption for gas-fired power stations in Germany and legislation on state aid

Following adoption of the law on the ecological tax reform on 16 December 1999, environmentally friendly combined gas and steam turbines (gas-steam power plants) are to be exempted from the tax on natural gas. Political negotiations between the German government and the Commission are currently under way on granting approval for this tax exemption pursuant to the legislation on state aid, and on the time limit for such an exemption. The Commission has proposed restricting the tax exemption to five years without degression. Nevertheless, there are significant arguments in favour of a longer period (around ten years).

1. On what basis did the Commission take its decision to class the planned tax exemption for combined gas and steam turbines as selective aid within the meaning of Article 87(1) of the EC Treaty?

2. Would the Commission endorse the view taken by the legal expert Dr Sellner that the planned tax exemption cannot automatically be classed as selective aid within the meaning of Article 87(1) of the EC Treaty?

3. What factors led the Commission to regard the planned tax exemption as an aid for undertakings rather than investment aid?

4. Does the Commission share the view that restricting the measures to a period of five years should be seen as problematic, given that the new version of the 1994 Community framework on environmental aid currently undergoing revision would allow a period of ten years?

5. Does the Commission share the view that restricting the tax exemption for highly efficient gas-steam power plants to five years would run counter to fulfilment of the obligations laid down in the Kyoto Protocol on climate change?

6. Does the Commission share the view that such a tax exemption would not give rise to any distortion of competition pursuant to Article 87(1) of the EC Treaty because the electricity producers which compete with gas-steam power plants (nuclear power stations, coal-fired power stations, producers of renewable energies) have themselves received and continue to receive considerable state support?

Answer given by Mr Monti on behalf of the Commission

(11 October 2000)

1. By letter dated 16 September 1999, Germany, acting in accordance with Article 88 (formerly Article 93) of the EC Treaty, notified the Commission of the tax exemption for gas-steam power plants as one of several measures under the continuation of the ecological tax reform. On 15 February 2000 the Commission reached a decision on most of the measures notified in this connection(1). The only measure not covered by the decision was the tax exemption for gas-steam power plants, the reason being that, in this respect, the notification was not complete. The Commission asked Germany for further information and has therefore not yet taken a decision on the exemption.

By letter dated 22 August 2000, Germany withdrew the pending notification and informed the Commission of its intention to reformulate the tax exemption. At the same time, a corresponding new notification was sent.

2. The Commission is not in possession of the assessment made and so cannot express an opinion on it.

3. It follows that the Commission has not as yet taken a decision in this respect either.

In general, the following can be said regarding the procedure for classifying aid as investment aid. As a precondition for authorisation, the Commission's various guidelines provide that investment aid granted for the purposes more closely defined in the guidelines may be authorised if it does not exceed an intensity also laid down in those guidelines. This intensity is in each case to be determined on the basis of the eligible costs, again laid down in the relevant guidelines. For example, the current Community guidelines on state aid for environmental protection(2) provide that, in principle, investment aid may be authorised up to an intensity of 30 %. Intensity relates strictly to the extra costs necessary to meet the environmental objectives.

Consequently, aid is eligible as investment aid with a given intensity only when it is set against the eligible costs of the investment, thereby enabling a given intensity to be established.

According to the Commission's provisional assessment, this has not, however, been done in the present case. Although the tax exemption envisaged in the relevant provision of the Mineral Oil Tax Law applies solely to new gas-steam power plants, the only restriction imposed is one of time, namely ten years, and no link is made to the costs associated with the investment, with the result that it is impossible to establish an aid intensity.

4. The Commission is currently examining the notified measure in the light of the current Community guidelines on state aid for environmental protection and taking into account its existing decision-making practice regarding the approval of operating aid.

It has not as yet taken any decision on the new version of the Community guidelines on state aid for environmental protection. In evaluating a measure such as the one in question, it will, however, have to be borne in mind in each case that the point is not to grant an exemption from newly introduced environmental taxes so as to make it easier for existing firms to adjust to the new cost situation, but to exempt new plant from a tax which already exists.

5. The Commission is always favourably disposed towards environmental aid. This is also the case when it comes to assessing environmental aid intended to implement the obligations of the Kyoto Protocol on climate change. However, it does not follow that the aid control rules do not in principle apply to such measures.

6. A distortion of competition exists when the measures affect a competitive relationship between firms or branches of production. According to the Commission's provisional assessment, that would not seem to be ruled out in this case. The fact that competitors may in turn be recipients of other forms of state aid cannot mean that Article 87(1) (formerly Article 92(1)) of the EC Treaty is not relevant. Instead, such aid should in turn be examined to ascertain whether it is compatible with the common market.

(1) See under: http://europa.eu.int/comm/secretariat_general/sgb/state_aids/industrie_1999.htm, N 575/A/99.

(2) OJ C 72, 10.3.1994.