State aid — Invitation to submit comments pursuant to Article 6(5) of Commission Decision 2496/96/ECSC of 18 December 1996 establishing Community rules for State aid to the steel industry (OJ L 338, 28.12.1996) concerning aid C 19/2001 (ex N 197/2000) — Climate change levy (ECSC) (Text with EEA relevance)
Date: 2001-07-07
Institutions: European Commission
Subjects: State aid, aid to industry, climate change, environmental protection, iron and steel industry, tax system

7.7.2001

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Official Journal of the European Communities

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Invitation to submit comments pursuant to Article 6(5) of Commission Decision 2496/96/ECSC of
18 December 1996 establishing Community rules for State aid to the steel industry (OJ L 338,
28.12.1996) concerning aid C 19/2001 (ex N 197/2000) (cid:151) Climate change levy (ECSC)

STATE AID

(2001/C 191/03)

(Text with EEA relevance)

By means of the letter dated 5 April 2001 reproduced in the authentic language on the pages following
this summary, the Commission notified the United Kingdom of its decision to initiate the procedure laid
down in Article 6(5) of Commission Decision 2496/96/ECSC concerning part of the abovementioned aid.

The Commission decided not to raise any objections to certain other measures, as described in the letter
following this summary.

Interested parties may submit their comments on the aid/measure in respect of which the Commission is
initiating the procedure within one month of the date of publication of this summary and the following
letter, to:

European Commission
Directorate-General for Competition
Directorate H1
Rue de la Loi/Wetstraat 200
B-1049 Brussels
Fax (32-2) 296 12 42

These comments will be communicated to the United Kingdom. Confidential treatment of the identity of
the interested party submitting the comments may be requested in writing, stating the reasons for the
request.

SUMMARY

The rates of levy in 2001/02 are expected to be:

1. Description of the measure/aid in respect of which the

Commission is initiating the procedure

The UK authorities intend to introduce from 1 April 2001 the
(cid:145)Climate change levy (CCL)(cid:146) on the non-domestic use of energy,
which is broadly the use as heating fuel, lighting, or for motive
power. The climate change levy package takes forward the
Government’s policy on environmental
taxation and is a
the United Kingdom Government’s climate
central part of
change programme, which sets
government’s
out
proposals for meeting the UK’s legaly binding target of a
12,5 % reduction in greenhouse
(Kyoto
Protocol) averaged over 2008 to 2012 and for moving
towards the Government’s domestic goal of a 20 % reduction
in carbon dioxide emissions by 2010.

emissions

gas

the

The legal base for the levy is the Finance Act 2000, Section 30
and Schedules 6 and 7.

Energy product

Levy rate
(pence per kilowatt hour)

Electricity

Gas

Coal and other solid fuels

Liquified petroleum gas

0,43

0,15

1,17 p/kg

0,07

It is proposed that energy products falling within the scope of
the levy will be exempt from it where the person to whom the
product is supplied intends to cause it to be used otherwise
than as fuel. The notion of fuel is not defined in the Finance
Act 2000. However, according to the United Kingdom auth-
orities it broadly covers use of energy products for motor and
heating purposes. It is proposed that where an energy product
is used for partly fuel and partly non-fuel purposes (mixed
uses) it will be fully exempt from the levy.

Mineral oils will not be brought within the scope of the tax
because they are already subject to excise duty in accordance
with Council Directives 92/81/EEC and 92/82/EEC (1).

(1) OJ L 316, 31.10.1992, p. 12 and 19.

The United Kingdom authorities consider this provision as a
general measure, and as part of the logic of the tax system.
According to the United Kingdom,
this dual use provision
applies to the steel sector, to the production of aluminium,
iron, lead, copper, zinc, batteries and some chemicals.

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2. Assessment of the measure/aid

(a) Existence of aid within the meaning of Article 4 of the ECSC

Treaty

sector the exemption favours one or more undertakings over
others, depending upon the production method employed.

The United Kingdom’s position is that the dual-use exemption
is a general measure that does not constitute State aid. They
claim that the CCL is a tax imposed on the use of energy
products used as fuel and that the exemption is in line with
Council Directive 92/81/EEC of 19 October 1992 on the
harmonisation of the structures of excise duties on mineral
oils (2)
((cid:145)the Mineral Oils Directive(cid:146)) as well as the proposal
the Community
for
((cid:145)the
framework for
in so far as only the use of energy products for
proposal(cid:146)),
motor and heating purposes fall within its scope.

a Council Directive

energy products (3)

restructuring

taxation of

the

The Commission therefore has doubts that the exemption can
be considered as a general measure.

The Commission notes that it falls to be assessed whether the
exemption can be justified on the basis of the nature and logic
of the tax system. The Commission notes the claim made by
the United Kingdom authorities that the imposition of the levy
solely on energy used for fuel is consistent with the provisions
of the Mineral Oils Directive and the proposal for a Council
Directive restructuring the Community framework for
the
taxation of energy products.

According to the United Kingdom authorities, the purpose of
the extension of this exemption to mixed uses is to provide
certainty and clarity for the taxpayer, who is the fuel supplier,
as to whether or not, on the basis of scientific advice, any use
of a commodity by the customer is exempt from the levy. The
United Kingdom authorities do not consider it to be technically
feasible to objectively apportion with sufficient accuracy the
fuel and non-fuel uses of energy products within certain
processes.

The Commission notes that the climate change levy is a tax on
the non-domestic use of energy, which broadly covers use as
heating fuel, lighting or for motive power. The levy will not
apply to fuels used for other than these purposes. Such a
the scope of an energy tax, whereby not all
definition of
uses of fuels are taxed, may be in the logic of a system such
as that established in the Mineral Oils Directive and in the
proposal
the
Council Directive
Community framework for the taxation of energy products.

restructuring

for

a

The Commission considers that the exemption gives the bene-
fiting companies an advantage, which is financed through State
In assessing whether this exemption is a general
resources.
measure, as
it
the United Kingdom claims, or whether
constitutes State aid, the Commission considers it necessary
to assess whether the effects would favour certain undertakings
or the production of certain goods. The Commission notes
that, according to the information provided by the United
Kingdom authorities, the exemption will favour the production
of certain goods, namely some metals (including aluminium,
iron,
lead, copper and coke) as well as batteries and some
chemicals.

However,
beyond such a definition of the scope of the levy.

the proposed exemption for dual use fuels goes

the exemption may not
treat comparable situations
Firstly,
equally,
in so far as some dual-use processes are exempt
from the levy, while other processes, which may also fall to
be considered as dual use, are not exempted.

Secondly, the UK exempts fuels entirely from the levy, even if
they are only partially used for non-energy purposes as defined
above.

The Commission further notes that within the steel sector, the
exemption will cover the use of, among other materials, coke
in the blast furnace as well as the electric arc furnace steel
production methods. The Commission notes however that
the effect of the exemption will be to relieve blast furnace
operators of the imposition of the levy on a higher proportion
of energy consumed/input into the furnace than is the case for
electric arc furnace operators. The Commission notes that
Corus is the dominant company in the steel production
sector in the United Kingdom, that it consumes 90 to 95 %
of energy in the sector and that it uses blast furnaces for the
majority of
its
competitors use electric arc furnaces for the production of
steel.
the
exemption favours the steel production industry by relieving
the CCL. The
the heavily dominant producer of much of
Commission further considers that within the steel production

steel production, whereas certain of

The Commission

considers

therefore

that,

its

(2) OJ L 316, 31.10.1992, p. 12.
(3) OJ C 139, 6.5.1997, p. 14.

the proposal

for a Council
that
The Commission notes
Directive restructuring the Community framework for
the
taxation of energy products is not in force and cannot be
automatically relied upon as a reference point to establish the
logic and general nature of the tax system. However, it may
provide some indication of whether the dual use provision can
be considered as a general measure, although Article 13(1)
refers to fuels used principally for the purposes of chemical
reduction. The Commission has doubts, however,
the
exemption is fully consistent with the proposal, as it does
not extend to energy used in all metallurgical processes, as
would be required under Article 13(1)(a) of the proposal. The
Commission notes that according to the United Kingdom auth-
orities, a metallurgical process is a process which results in the
production of metal, for example, from ore. The Commission
has doubts that this interpretation is consistent with the notion
of metallurgical process in the proposal.
to be
consistent with the proposal,
it appears that energy used in
all metallurgical processes, namely in any metal production
process, should be exempt from the levy.

In order

that

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The Commission further notes the United Kingdom’s claim that
it is not possible to apportion the fuel/non-fuel use amounts of
energy products in certain processes with accuracy, and that for
reasons of clarity and certainty, a full exemption from the levy
is necessary for mixed uses. The Commission has doubts,
however,
cannot
establish a mechanism whereby an estimation of fuel/non-fuel
uses for certain processes can be made and the levy imposed
accordingly.

the United Kingdom authorities

that

(cid:151) to initiate the procedure laid down in Article 6(5) of
Commission Decision 2496/96/ECSC of 18 December
1996 establishing Community rules for State aid to
the steel industry on the tax exemption for dual use
fuels.

1. PROCEDURE

The Commission further notes that, if the energy part in the
dual use were to be fully exempted, the result may not be in
line with the objective of the levy to reduce CO2 emissions.

(b) Compatibility of the aid

Assuming that the exemption for dual use fuels constitutes
State aid,
the Commission has doubts on its compatibility
with the applicable environmental aid guidelines (OJ C 72,
10.4.1994, p. 3).

1. The Commission notes that the provision exempts energy
consumption for
some very energy-intensive processes
causing considerable CO2 emissions and thus runs counter
to the general objective of the tax, namely the reduction of
CO2 emissions.

2. The Commission notes that the exemption is not temporary,

nor is it degressive.

3. The Commission notes that the exemption is not made
conditional on the conclusion of agreements in order to
achieve environmental protection objectives, nor is the tax
subject
as
that have
agreements.

to conditions

effect

same

the

4. The UK has not demonstrated that firms eligible for the
exemption must nevertheless pay a significant proportion
of the national tax and that it is not merely compensating
for extra production costs.

For the above reasons, the Commission has doubts that the
dual-use exemption is compatible with the guidelines.

TEXT OF LETTER

(cid:145)1. The Commission wishes to inform the United Kingdom
that, having examined the information supplied by your
authorities on the measures referred to above,
it has
decided:

(cid:151) not to raise objections to the tax exemptions from the
climate change levy for electricity from renewable
sources,
for CHP, and on the tax reductions for
companies entering into climate change agreements,

registered

2. By letter dated 14 February 2000, the United Kingdom
authorities notified the climate change levy ((cid:145)CCL(cid:146)) to the
Commission. This notification is
as N
123/2000 ((cid:145)the EC notification(cid:146)). By letter dated 5 April,
the United Kingdom authorities notified the CCL in
accordance with Decision 2496/96/ECSC (4) of 18
December 1996 establishing Community rules for State
aid to the steel industry ((cid:145)the Steel Aid Code(cid:146)). Since the
notification,
received additional
information from, and met with, the United Kingdom
authorities several times.

the Commission has

2. BACKGROUND

2.1. Description of the CCL

3. The UK authorities intend to introduce the CCL on the
non-domestic use of energy, which is broadly the use as
heating fuel or for motive power. The climate change levy
package takes forward the United Kingdom Government’s
policy on environmental taxation and is a central part of
the United Kingdom Government’s
change
programme, which sets out the Government’s proposals
for meeting the UK’s legally binding target of a 12,5 %
reduction in greenhouse gas emissions (Kyoto Protocol)
and
Kingdom
Government’s domestic goal of a 20 % reduction in
carbon dioxide emissions by 2010.

for moving

the United

towards

climate

4. This new levy is introduced in order to meet the UK’s
international greenhouse gas abatement obligations and
to progress towards the domestic goal of reducing CO2
emissions. This new environmental
is
intended to deliver absolute carbon/energy reductions in
the steel sector of 200 000 tonnes per year, by 2010.

Instrument

5. The legal base of

the CCL is the Finance Act 2000,
Section 30 and Schedules 6 and 7, which received
Royal Assent on 28 July 2000. The levy is scheduled to
come into effect on 1 April 2001.

6. The CCL will cover non-domestic use of primary and/or
secondary fuel for lighting, heating, motive power and
power for appliances by consumers in industry (including
fuel
industries), commerce, agriculture, public adminis-
tration and other services. The tax will be levied at the
point of sale to the final consumer.

7.

In order to avoid double taxation the levy will not apply
where a taxable commodity is used to produce another
taxable commodity.

(4) OJ L 338, 28.12.1996, p. 42

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8. Mineral oils will not be brought within the scope of the
tax because they are already subject to excise duty in
accordance with Council Directives 92/81/EEC and
92/82/EEC (5).

9. The levy will apply also to imported commodities when
used in the UK. It will not be applied to commodities
which are intended to be used outside the UK.

10. The rates of levy in 2001/02 are expected to be:

Energy product

Levy rate (pence per kilowatt hour)

Electricity

Gas

Coal and other solid fuels

Liquified petroleum gas

0,43

0,15

0,15

0,07

2.2. Description of the reductions/exemptions

11. The UK Government notified several exemptions or

reduced rates of the tax. These are:

(cid:151) reductions for facilities entering into climate change

agreements,

(cid:151) exemption for electricity generated by good quality

CHP,

(cid:151) exemption for electricity generated from renewable

sources,

(cid:151) exemptions for dual uses.

12. The UK Government

intends to enter into a climate
change agreement with the steel
industry until 2013,
that is a period for tax benefits of 12 years. However,
the United Kingdom authorities seek approval of the tax
reduction linked to climate change agreements for 10
years. Also the legal provisions for the other exemptions
are by nature unlimited, but notified for a period of 10
years.

2.2.1. Exemption for outputs of good quality combined heat

and power plants (CHP)

13. CHP makes significant fuel, cost and emissions savings
over conventional, separate forms of power generation
and heat-only boilers. The generation and supply of elec-
tricity from power stations is generally at an efficiency in
the range 25 to 50 %, based on the gross calorific value
(GCV) of
the fuel and including transmission and
distribution losses. This means that 50 to 75 % of the
energy content of
is not usefully employed.
rejected as heat
This unutilised energy content
directly to the atmosphere or into seas or rivers. The
in
generation of electricity and the recovery of heat

the fuel

is

(5) OJ L 316, 31.10.1992 pp. 12 and 19.

CHP schemes typically achieve overall efficiencies of 60
to 80 % and sometimes more.

14. Unlike conventional methods of electricity generation,
some of the heat cogenerated in a CHP scheme is used
typically in industrial processes or for heating and hot
water in buildings. The heat used in this way displaces
heat that would otherwise have to be supplied by burning
additional fuel and so leads directly to a reduction in
a
provides
emissions. The
particularly cost-effective approach for
reducing CO2
emissions.

development

of CHP

15. The UK Government has a target of

increasing the
installed capacity of CHP from its current
level of
4,5 GW to at least 10 GW by 2010. This will lead to
additional
reductions in carbon dioxide emissions of
about 4 million tonnes per annum.

16. However, in the absence of any incentives to promote the
it is estimated that CHP capacity

development of CHP,
will only increase to 7 GW by 2010.

17. The economic viability of CHP is critically dependent on
the differential between electricity and gas prices. Over
the last five years, electricity prices have fallen by 3 % in
real terms, while gas prices have increased by 30 %. These
factors together have resulted in an extremely adverse
effect on CHP economics. Without any exemption for
CHP, the climate change levy (CCL) will exacerbate this
problem, as it will
increase gas prices proportionately
more than electricity prices.

18. It is important to recognise that the cost-effectiveness of
CHP is marginal in many instances. The proposed CHP
exemption will help to tip the balance in favour of
cases. The
investment of CHP in many of
exemption will address market imperfections and help
to counteract the effect of the trend in energy prices
over
recent years, which has reduced the cost-effec-
tiveness of many CHP schemes. These issues apply just
as much in the business sector as within any other sector
of the economy.

these

19. The United Kingdom authorities have therefore proposed
that good quality CHP should be exempt from the climate
change levy. The definition of good quality CHP (6)
is
based on threshold criteria, which must be met or
exceeded in order
the scheme to
for
qualify as (cid:145)good quality(cid:146).

the whole of

20. Threshold criteria are set for quality index and power

efficiency (7).

(6) Established by the UK’s CHP quality assurance programme

(CHPQA).

(7) Power efficiency is the proportion of

input energy which is
converted to electrical or mechanical power, whilst
the quality
index is a measure of the overall efficiency of a CHP scheme,
taking account of the efficiency of production of both heat and
power.
In the definition of
the quantity of power
produced is weighted relative to the quantity of heat, given the
greater energy and environmental cost
involved in generating
power.

the quality index,

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21. The CHPQA programme provides

a

for

rigorous
assessment of the energy efficiency and environmental
performance of CHP schemes. It is much more rigorous
in this respect than simply assessing the overall efficiency
of a CHP scheme. In particular, the weighting given to the
generation in the
efficiency of power
assessment
procedures
the environmental benefits of
recognises
using CHP rather than conventional energy generation
conventional boiler
technologies.
electrical power
system with a
generation could
relatively high (cid:145)headline(cid:146)
energy conversion efficiencies, but offers much reduced
environmental benefit compared to good quality CHP.

In comparison,

amount of

achieve

small

a

The extent of the exemption on fuel input and energy output depends
on the degree of delivering good quality CHP

22. A scheme meeting or exceeding the threshold quality
index and power efficiency criteria will qualify as good
quality CHP for its entire capacity, annual energy inputs
and annual energy outputs.

23. A CHP scheme that does not meet the threshold criteria
for good quality CHP will not be eligible for CCL
exemption on its entire fuel input or power output, but
only for a part of it, corresponding to the good quality
portion of the overall CHP scheme.

Regular monitoring

the

24. It is a requirement of CHPQA that CHP schemes are
assessed against
to ensure
continued performance in relation to the good quality
CHP threshold criteria. If there is a change in the level
of performance, eligibility for exemption from the climate
change levy shall be adjusted appropriately.

standard each year

2.2.2. Exemption for electricity generated from renewable

sources

25. The United Kingdom authorities propose to exempt from
the levy electricity sold by electricity suppliers which can
be matched with purchases from an eligible generator.
The technologies eligible for exemption will be: wind
energy, hydro power up to 10 MW, tidal power, wave
energy, photovoltaics, photoconversion, geothermal hot
biodegradable
dry
fraction of municipal and industrial waste,
landfill gas,
agriculture and forestry waste, energy crops and sewage
gas.

geothermal

aquifers,

rock,

the

26. Suppliers will be able to exempt sales of electricity from
the levy if the supplier has contracted with a generator or
generators of eligible renewable electricity to purchase
such electricity; the supplier agrees to independent audit

by the authorities; and the generator(s) agree to the same
conditions.

27. This exemption is also applicable to imported electricity

from renewable sources.

2.2.3. Reductions for facilities entering into climate change

agreements

28. The United Kingdom authorities also recognise the need
for special consideration to be given to the position of
energy-intensive industries given their energy usage, the
requirements of the integrated pollution prevention and
control
to international
competition. Consequently, the Government will provide
an 80 % discount from the levy for those sectors that can
agree targets for improving their energy efficiency or
reducing carbon emissions ((cid:145)agreements(cid:146)).

regime and their

exposure

pollution

integrated

prevention

29. The United Kingdom authorities define an (cid:145)energy
intensive(cid:146) sector as one which operates processes which
will be covered by Annex I of Council Directive 96/61/EC
and
concerning
control (8). This criterion applies throughout
the UK
and has been chosen because sites operating such
processes will be subject to a legal requirement to use
energy efficiency (cid:151) other sites are not subject to this
requirement. Small
sites which fall below PPC size
thresholds (with the exception of thresholds relating to
combustion plant), but which would otherwise be
covered by the proposed regulations, will also be
eligible for the relevant sector agreement.

30. The agreements cover a period of twelve years (2001 to
2013). The UK Government seeks Commission approval
for a period of 10 years and confirmed that it would
terminate the agreements with sectors after 10 years if
no Commission decision allows
their prolongation
(commitment see above).

31. Two options are envisaged for

the form of

these

agreements:

(cid:151) sector

level

((cid:145)umbrella

agreements

agreements(cid:146))
between the industrial sector associations (9) and the
relevant Secretary of State under which sector targets
would be set. Individual entities participating in the
scheme would additionally agree individual
targets
and would enter into separate agreements with the
Secretary of State ((cid:145)participation agreements(cid:146)). The
reduction in levy would be available either if
the
sector as a whole met its target or, failing that, if an
individual entity met its target (in which case, only
entity would qualify for a levy
that
reduction),

individual

(8) These sites and installations will,

in due course, be subject to a
regulatory requirement,
in terms of having to operate in an
energy efficient manner. The activities in question include activities
of energy industries, production and processing of metals, mineral
industry, chemical
industry, waste management and some other
activities.

(9) Or an organisation especially set up by the sector association for

this purpose.

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(cid:151) sector level agreement between the Government and
the sector association, but in which the participant
is between the sector association
level agreement
their facility or
and each participant in respect of
to agree the
facilities. The UK Government has
model agreement used by the sector and will also
approve each individual agreement before they will
be permitted to come into effect.

into climate

equally eligible

32. The CCL is only payable by those operators carrying out
economic activity in the United Kingdom, all of whom
are
change
to enter
agreements, no matter what their origin. Any undertaking
setting up a new establishment in the UK will be eligible
to enter into an agreement on equivalent terms to those
agreed with their sector in existing agreements. Provided
that an equivalent target can be agreed for qualifying
include the estab-
activities,
lishment within the relevant sectoral agreement and the
establishment will become eligible for the 80 % discount.

the UK authorities will

33. The targets consist of quantitative energy efficiency and
carbon emissions
reductions outcomes, defined in
absolute terms or per unit output. Milestone targets are
set for two-year periods.

34. Targets are reviewed twice, in 2004 and 2008 in order to
ensure that they continue to represent the potential for
cost-effective energy savings taken into account of any
changes in technical or market circumstances.

38. If the beneficiary is unable to meet a milestone target due
to a relevant constraint or requirement, progress made
towards meeting the targets is taken as being satisfactory.
These constraints or requirements are:

(cid:151) constraint or requirements imposed by or under town
and country planning, environmental, health and
safety or food hygiene legislation,

(cid:151) certain constraints or requirements imposed on the
construction or operation of a CHP plant under the
Energy Act 1976 or Electricity Act 1989,

(cid:151) unforeseen major disruptions to energy supply of

more than 240 consecutive hours.

39. The scheme foresees the possibility of meeting agreed
targets by carbon emission trading entities committed in
a climate change agreement. Emission trading should later
on be possible also with participants in a wider emission
trading scheme, subject to approval of such a linkage by
the Commission. Details of such a scheme are not yet
available. The UK authorities undertake that unless the
Commission agrees otherwise, carbon trading will only
be allowed between participants
in climate change
agreements, and then only where the selling party has
restriction is
verified surplus
contained in the climate change agreements.

carbon to sell. This

35. The UK government will make targets transparent by
reporting to the UK Parliament, and as appropriate, to
the devolved legislatures.

40. Recuperation: a beneficiary who does not meet a
lose the levy reduction for the
milestone target will
next
If he then meets the next milestone
two years.
target, he will be allowed the levy reduction for the
following two years.

36. Tolerance bands allow small overshoots of the milestone
target to be accepted for those participants who have
otherwise demonstrated satisfactory performance
in
view of additional qualitative criteria (such as good
environmental management). The tolerance band facility
will not be available after the third milestone.

37. Over the period envisaged for the agreements participants
will wish to be free to choose whether to respond to
market demand for new products or a different mix of
products from that on which their original energy/CO2
savings targets were based. This may lead to an increase
or decrease of energy per unit of production. The scheme
foresees an adjustment procedure in order to adapt the
targets to a change in the product mix until 2006. A
this possibility will depend on
potential extension of
the successful introduction of a carbon emission trading
scheme. Participants with absolute targets would not be
permitted to use this procedure. The product mix
approach is not available for those participants who
choose a tolerance band approach.

41. While the mechanism of such a (cid:145)forward penalty(cid:146)

is
different
from a clawback provision for levy rebates
received over the past years, the UK government claims
that the risk of losing the levy reduction for the future is
a stronger incentive for beneficiaries to meet their targets
than a proportionate
clawback mechanism would
provide.

introduce a provision to recover

42. For the last milestone target, for which the prospective
loss of
levy reduction may not create a sufficient
incentive, the UK authorities have undertaken that they
levy reduction
will
granted to participants
two years of a
for
ten-year State aid approval in proportion to the extent,
if any, to which their last milestone targets were not met.
The UK authorities
this
consider
provision will require a change to the legislation, which
will be brought forward at the appropriate time. As yet
the framework for recovery has not been settled, but will
be considered in the prevailing circumstances.

it probable

the last

that

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43. When negotiating the targets with the sectors concerned,
the principal benchmark used by the UK authorities to
assess whether these targets are demanding is the UK
study of
for savings achievable through
the implementation of all energy-saving measures which
are cost-effective (10).

the potential

of fuel is not defined in the Finance Act 2000. However,
according to the United Kingdom authorities it broadly
covers use of energy products for motor and heating
purposes. It is proposed that where an energy product
is used for partly fuel and partly non-fuel purposes
(mixed uses) it will be fully exempt from the levy.

that

some

includes

44. The United Kingdom authorities have concluded an
umbrella agreement with the UK Steel Association ((cid:145)the
features,
Agreement(cid:146)),
reflecting the dominance of Corus UK Ltd ((cid:145)Corus(cid:146)),
in
the sector. According to the United Kingdom authorities,
the cost of the Agreement to the United Kingdom auth-
is estimated to be
lost revenue,
orities,
GBP 90 million. Corus is a primary steel producer and
accounts
energy
about 90 to 95 % of
consumption in the sector.

in terms of

specific

total

for

45. The Agreement sets reduction targets over two phases.
the target profile runs from the
The first phase of
energy consumption level
for 1997 to 2005, over
which period the target reduction is 7,45 %. From 2005
to 2010, a further energy consumption reduction of
2,55 % has been agreed. These targets and the biannual
milestone targets will be subject to the mandatory reviews
at 2004 and 2008. According to the United Kingdom
authorities
the
savings
carbon
total
Agreement will be 200 000 crude tonnes.

under

the

46. The Agreement

special

features

includes

including
restrictions on the possibility of Corus selling carbon
emission credits should it meet its energy consumption
targets. Given that one of the features of the Agreement is
that energy reduction targets are measured at the sectoral
it also provides for the adjustment of the target
level,
if Corus’ energy use falls below the 2002 and
sector,
steel
2004 target
producers participating in the Agreement will have to
reduce energy consumption.

to ensure that all

so as

levels,

47. Companies will not be allowed to receive aid under this
scheme and also other aid for the investments necessary
to fulfil the Agreement. They can, however, benefit from
enhanced
efficient
investment, a measure which does not constitute State
aid under Article 4(c) of the ECSC Treaty (11).

allowances

energy

capital

for

48. The UK authorities undertake to provide the Commission
with a progress report after each two-year review.

2.2.4. Exemption for dual use fuels

50. The United Kingdom authorities consider this provision
as a general measure, and as part of the logic of the tax
system. According to the United Kingdom, this dual use
provision applies to the steel sector. In particular, it will
cover the use of coke and other materials in the steel
production process in the blast furnace and the electric
arc furnace. The cost of this exemption to the United
Kingdom Government, in terms of lost revenue, and in
addition to the cost of the reductions granted under the
terms of
is estimated to be GBP 18
million.

the Agreement,

3. ASSESSMENT

51. The notified measures, in so far as they affect the steel
sector, fall to be examined under Article 4(c) of the ECSC
Treaty, the Steel aid Code and Protocol 14 to the EEA.
The introduction of environmental taxes by means of
taxes on the consumption of electricity, fuel, mineral oil
and gas are not as such caught by Article 4(c) of the
ECSC Treaty in so far as they are general measures
which do not
sectors of
industry. Exceptions to a general tax, reduced tariffs and
refunds from the tax do fall under the scope of Article
4(c) of the ECSC Treaty if they are targeted at certain
firms or sectors of the ECSC steel industry, and without
these exemptions being justified by the nature or general
scheme of
in
Commission notice on the application of the State aid
rules to measures relating to direct business taxation, OJ
C 384, 10.12.1998, p. 3, point 13 et seq.).

the system (see the principles set out

favour particular

firms or

3.1. Existence of aid

3.1.1. Exemption for outputs of good quality (GQ) combined

heat and power plants (CHP)

52. The benefits and beneficiaries of

the exemption are
assessed by comparing (1) the treatment of a GQ CHP
system, respectively the qualifying portions of it, with the
electricity production from conventional sources and (2)
by comparing heat or steam production in GQ CHP with
conventional heat or steam production.

49. It is proposed that energy products falling within the
from it where the
scope of
person to whom the product
is supplied intends to
cause it to be used otherwise than as fuel. The notion

the levy will be exempt

53. Operators of GQ CHP systems do not pay levy on the
input fuel. This is in line with the general rule of the tax
for electricity
law, which does not
production in order to avoid double taxation.

tax the input fuel

(10) The study has been published as (cid:145)Industrial sector CO2 emissions:
projections and indicators for the UK 1990 to 2020, April 1999(cid:146)
(EPSC 20616001/Z/1). The assessment of
the potential savings,
sector by sector, has assumed unlimited availability of capital and
management time and therefore is an upper potential limit with
known technologies.

(11) N 797/2000, Commission Decision of 13 February 2001.

I. Operators of GQ CHP systems do not pay levy on the
electricity they produce from a GQ CHP for their own
use

II. Known end-users do not pay levy on electricity they

purchase from a GQ CHP for their own use

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54. This gives operators of GQ CHP systems an advantage
compared to conventional power generators who pay levy
on electricity used on site and gives known end-users an
advantage compared to end-users who buy electricity
from the grid for their own use. This relieves them of
charges that are normally borne from their budgets and
gives the recipient firms an advantage over other firms.
The advantage is granted through State resources as the
State suffers a loss of tax revenues. The recipients exercise
an economic activity on markets on which there is or
could be trade between Member States or on which
firms from other Member States might wish to establish
themselves. The scheme thereby distorts or threatens to
distort competition and could affect
trade between
Member States.

55. The Commission assessed in particular if the exemption
is aid to the

is aid to certain undertakings or (b)

(a)
production of certain goods.

I. Operators of GQ CHP systems

(a) Does the exemption constitute aid to certain undertakings?

56. The exemption is applied in all of

the UK, granting
automatic rights if objective quality criteria are fulfilled.
The exemption for GQ CHP applies to all autogenerator
CHP systems, independent of their type or size.

chemical

refineries,

subsectors as

and printing;

food products, beverages

57. CHP is technology to increase energy efficiency in the
It is
context of a wide variety of economic activities.
in so
strongly used in the manufacturing sectors,
different
industry;
and
paper
tobacco; metal products; machinery; equipment; mining
and agglomeration of solid fuels; extraction of crude oil
and natural gas; coke ovens; extraction and processing of
nuclear fuels; iron and steel industry; non-ferrous metals;
non-metallic mineral products extraction; textile; clothing;
and leather. It is also used in other industrial branches, in
transport,
in the service sector and for public supply
(district heating).

58. Thus all companies throughout a wide range of sectors of
the economy are beneficiaries, independent of their size,
location or economic activity. The criteria for defining
(cid:145)GQ(cid:146) CHP are objective and not designed in a way that
would limit
the exemption to specific
sectors. The majority of existing CHP systems already
fulfill
fulfilling the
standard can upgrade to fulfill the criteria at least for a
considerable portion of their production.

standard. Stations not yet

the benefit of

the

(b) Is (cid:145)GQ CHP electricity(cid:146) a specific product?

59. The product (cid:145)GQ CHP electricity(cid:146) can be produced by a
large number of companies in various sectors. In most of
these sectors, CHP is not used to produce electricity as a
core product of the business, but the technology is used

to produce the different products of the companies more
efficiently, by increasing the energy efficiency of
the
production process. In the case of most of the GQ CHP
operators, (cid:145)GQ CHP electricity(cid:146) is not a specific product.

60. This may be different for a certain type of CHP system
operators, namely power stations, using CHP technology
for producing electricity to feed into the grid (12). For
such companies,
the production of electricity is their
core business, and the electricity produced is in direct
competition with the same product from conventional
electricity producers. However, electricity from CHP
systems is not exempt,
it is sold via the grid. The
exemption includes only GQ CHP electricity used on
site. With respect to this electricity, CHP power stations
are in the same situation as any other autogenerator in
any other sector of the economy, who produces QG CHP
for use on site.

if

61. Therefore,

it can be concluded that the exemption for
good quality CHP electricity used on site is not selective.

II. Known end-users do not pay levy on electricity
they purchase from a GQ CHP for their own use

and power

62. Known end-users are users, whose main business is not
the production of heat or power. They could produce
heat
for use on their own site, but
outsource this production (because it is not their core
business)
to a separate entity delivering mainly to a
group of known end-users (closed system). Known end
users are not (cid:145)formally(cid:146) producing their own power, but
practically they are in the same situation as an autogen-
erator, who produces power for use on site. It should also
be noted that such (cid:145)closed systems(cid:146) are comparable to a
(cid:145)use on site situation(cid:146) as regards the energy efficiency of
electricity transfer compared to electricity transfer via the
grid.

the same arguments
63. The Commission considers
apply as under point
(use of CHP as technology
available throughout the sectors) and that the measure
is not selective.

that

I

64. Operators of GQ CHP do not pay levy on input fuels to
produce heat. This favours them in comparison to the
conventional production of heat, where the input fuel is
taxed. Again, the measure does not favour certain under-
takings, as CHP is a technology available in a wide range
of sectors.

the continuation of

(12) In its decision on a temporary tax exemption for certain combined
cycle power plants in the context of
the
tax reform in Germany (SG(2000) D109283 of 14
ecological
December 2000), the Commission argued that (cid:145)the relevant gas
and steam turbine plants are being used quite predominantly to
generate electricity for feeding into the grid. The technology (CHPs
excluding heat extraction) is not one which can be used virtually
indiscriminately in all sorts of firms in all branches of industry.
Since it can accordingly be assumed that the effects of the tax
exemption will be felt,
least quite
predominantly in a certain sector, the measure favours certain
the production of certain goods within the
undertakings or
meaning of Article 87(1).(cid:146)
there were only very few
stations using this type of technology in Germany.

if not exclusively,

then at

In fact

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65. The Commission therefore concludes that the exemption
on CHP does not constitute State aid according to Article
4 of the ECSC Treaty.

3.1.2. Exemption for electricity generated from renewable

sources

66. Firms purchasing electricity generated from renewable
sources are fully exempt from the levy on the electricity.
This relieves them of charges that are normally borne
from their budgets and gives the recipient
firms an
advantage over other firms. The advantage is granted
through State resources as the State suffers a loss of tax
revenues. The recipients exercise an economic activity on
markets on which there is or could be trade between
Member States or on which firms from other Member
States might wish to establish themselves. The scheme
thereby distorts or threatens to distort competition and
could affect trade between Member States. However, any
company in any sector of
the economy is able to
purchase electricity from renewable sources. Thus, the
tax exemption does not favour certain undertakings or
the production of certain goods and is therefore not
selective.

67. However it has to be also considered that the exemption
will favour at the same time the generators of electricity
from renewable sources feeding the electricity into the
grid. The Commission notes, however, that there are no
such ECSC companies feeding electricity into the grid.
Consequently, this potential benefit does not fall to be
considered in this Decision.

3.1.3. Reductions for facilities entering into climate change

agreements

from their budgets and gives

firms an advantage over other

68. Firms entering into the Agreement are exempted for 80 %
the levy. This relieves them of charges that are
of
the
normally borne
firms. The
recipient
advantage is granted through State resources as the
State suffers a loss of
tax revenues. The recipients
exercise an economic activity on markets on which
there is or could be trade between Member States or
on which firms from other Member States might wish
to establish themselves. The scheme thereby distorts or
threatens to distort competition and could affect trade
between Member
fulfilling
States. Only
specific criteria can enter into the Agreements. Thus,
the tax exemption favours certain undertakings or the
production of certain goods and is therefore selective. It
is not a measure which would be in the nature of the tax
law.

companies

69. The levy reduction for companies entering into the
Agreements therefore constitutes State aid under Article
4 of the ECSC Treaty.

3.1.4. Dual-use exemption

State aid. They claim that the CCL is a tax imposed on
the use of energy products used as fuel and that the
exemption is in line with Council Directive 92/81/EEC
the
of 19 October 1992 on the harmonisation of
structures of excise duties on mineral oils (13)
((cid:145)the
for a
Mineral Oils Directive(cid:146)) as well as the proposal
Council
Community
restructuring
framework for the taxation of energy products (14) ((cid:145)the
proposal(cid:146)), in so far as only the use of energy products for
motor and heating purposes fall within its scope.

Directive

the

71. According to the United Kingdom authorities,

the
purpose of the extension of this exemption to mixed
uses is to provide certainty and clarity for the taxpayer,
who is the fuel supplier, as to whether or not, on the
basis of scientific advice, any use of a commodity by the
customer is exempt from the levy. The United Kingdom
authorities do not consider it to be technically feasible to
objectively apportion with sufficient accuracy the fuel and
non-fuel uses of energy products within certain processes.

resources.

In assessing whether

72. The Commission considers that the exemption gives the
benefiting companies an advantage, which is financed
through State
this
exemption is a general measure, as the United Kingdom
authorities claim, or whether it constitutes State aid, the
Commission considers it necessary to assess whether the
effects would favour
the
production of certain goods. The Commission notes
that, according to the information provided by the
United Kingdom authorities, the exemption will favour
the production of certain goods, namely some metals
(including aluminium,
lead, copper and coke) as
well as batteries and some chemicals. The Commission
therefore has doubts
exemption can be
considered as a general measure.

certain undertakings or

iron,

that

the

that

effect of

the exemption will cover

73. The Commission further notes that within the steel
the use of, among
sector,
other materials, coke in the blast furnace as well as the
steel production methods. The
electric arc furnace
Commission notes however
the
the
exemption will be to relieve blast furnace operators of
the imposition of the levy on a higher proportion of
energy consumed/input
into the furnace than is the
case for electric arc furnace operators. The Commission
notes that Corus is the dominant company in the steel
it
production sector
consumes 90 % to 95 % of energy in the sector and
that it uses blast furnaces for the majority of its steel
production, whereas
competitors use
certain of
electric arc furnaces for the production of steel. The
the exemption
Commission therefore considers
favours the steel production industry by relieving the
heavily dominant producer of much of the CCL. The
Commission further considers
that within the steel
production sector the exemption favours one or more
undertakings over others, depending upon the production
method employed.

in the United Kingdom,

that,

that

its

70. The United Kingdom’s position is

the dual-use
exemption is a general measure that does not constitute

that

(13) OJ L 316, 31.10.1992, p. 12.
(14) OJ C 139, 6.5.1997, p. 14.

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74. The Commission therefore has doubts that the exemption

can be considered as a general measure.

75. The Commission notes that it falls to be assessed whether
the exemption can be justified on the basis of the nature
and logic of the tax system. The Commission notes the
claim made by the United Kingdom authorities that the
imposition of the levy solely on energy used for fuel is
the Mineral Oils
consistent with the provisions of
for a Council Directive
Directive and the proposal
restructuring
the
taxation of energy products.

the Community

framework

for

lighting or

76. The Commission notes that the climate change levy is a
tax on the non-domestic use of energy, which broadly
covers use as heating fuel,
for motive
power. The levy will not apply to fuels used for other
than these purposes. Such a definition of the scope of an
energy tax, whereby not all uses of fuels are taxed, may
be in the logic of a system such as that established in the
Mineral Oils Directive and in the proposal for a Council
Directive restructuring the Community framework for the
taxation of energy products.

77. However, the proposed exemption for dual-use fuels goes
beyond such a definition of the scope of the levy.

78. Firstly,

the

exemption may not

comparable
situations equally, in so far as some dual-use processes
are exempt from the levy, while other processes, which
may also fall
to be considered as dual use, are not
exempted.

treat

79. Secondly, the UK exempts fuels entirely from the levy,
they are only partially used for non-energy

even if
purposes as defined above.

80. The Commission notes that the proposal for a Council
Directive restructuring the Community framework for the
taxation of energy products is not in force and cannot be
automatically relied upon as a reference point to establish
the logic and general nature of the tax system. However,
it may provide some indication of whether the dual-use
provision can be considered as a general measure,
although Article 13(1) refers to fuels used principally for
the purposes of chemical reduction. The Commission has
doubts, however, that the exemption is fully consistent
with the proposal, as it does not extend to energy used
in all metallurgical processes, as would be required under
Article 13(1)(a) of the proposal. The Commission notes
that according to the United Kingdom authorities, a
metallurgical process is a process which results in the
from ore. The
production of metal,
interpretation is
Commission has doubts
consistent with the notion of metallurgical process in the
proposal. In order to be consistent with the proposal, it
appears that energy used in all metallurgical processes,
namely in any metal production process, should be
exempt from the levy.

example,
this

that

for

it

81. The Commission further notes the United Kingdom’s
is not possible to apportion the fuel/
claim that
non-fuel-use amounts of energy products
in certain
processes with accuracy; and that for reasons of clarity
and certainty, a full exemption from the levy is necessary
for mixed uses. The Commission has doubts, however,
that the United Kingdom authorities cannot establish a
mechanism whereby an estimation of fuel/non-fuel uses
for certain processes can be made and levy imposed
accordingly.

82. The Commission further notes that, if the energy part in
the dual use were to be fully exempted, the result may
not be in line with the objective of the levy to reduce
CO2 emissions.

83. For the reasons given above, the Commission has doubts
that the exemption for energy products used for purposes
other than as fuel can be considered as a general measure
and not as State aid.

3.2. Legality of the aid

84. By notifiying its intention to introduce the tax scheme,
the UK has complied with its obligation under Article 6
in
the Steel Aid Code to inform the Commission,
of
sufficient
its
to submit
to enable
comments, of any plans to grant or alter aid.

latter

time

the

3.3. Compatibility of the aid

85. Article 4(c) of the ECSC Treaty recognises as incompatible
with the common market and prohibits subsidies or aid
granted by States in any form whatsoever. On the basis of
Article 95 of the ECSC Treaty the Commission adopted in
1996 the Steel Aid Code which provides, on the basis of
certain
strict
derogations
prohibition.

from this

conditions,

86. Under Article 3 of the Steel Aid Code the Commission
assesses
environmental aid in accordance with the
material rules laid down in the Community guidelines
((cid:145)the
on State aid for
guidelines(cid:146)) and in conformity with the criteria outlined
in the Annex to the Steel Aid Code. This Annex only
the
applies
aid that would benefit
environment. As such aid does not form part of
the
notified scheme, the rules in the Annex do not apply
to this case.

environmental protection (15)

to investment

is necessary to offset

87. According to point 3.4 of the guidelines, temporary relief
from new environmental taxes may be authorised where
it
in competitiveness,
particularly at international level. A further factor to be
taken into account is what firms concerned have to do in
return, to reduce their pollution. According to point 3.4
such aid must only compensate for extra production costs
by comparison with traditional costs, and should be
temporary and in principle regressive.

losses

(15) OJ C 72, 10.3.1994.

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3.3.1. Tax reductions for companies entering into climate

change agreements

88. The measures fall

in the scope of application of

the
guidelines because the objective of the law is environ-
mental protection.
intended to reduce energy
is
consumption through increase of energy taxation.

It

89. The reduction of energy consumption is a common goal
of the environmental policy of the Community and its
Member States. The scheme is in accordance with the
objectives of
the Community’s environmental policy,
laid down in Article 174 EC. The taxation of energy
consumption is one of the means to achieve this goal.

90. As far as the measures concern relief from new environ-
mental taxes, point 3.4. of the environmental guidelines
acknowledges that
the introduction of such taxes can
involve State aid because some firms may not be able
to cope with the extra financial burden in the short
term, and may therefore require temporary relief. The
criteria for approving such aid, which is operating aid,
are that it must only compensate for extra production
costs by comparison with traditional costs, and should
be temporary and in principle degressive,
to
provide an incentive for reducing pollution or intro-
ducing more efficient uses of resources more quickly. A
further factor to be taken into account is what the firms
concerned have to do in return to reduce their pollution.

so as

91. The climate change levy is a new environmental tax on
products in respect of which no Community tax harmon-
isation has been carried out.

92. Although companies will have to make investments in
order to achieve the targets of the agreements, the tax
reduction is not directly linked to and expressed as a
tax
eligible
percentage
reduction thus constitutes operating aid.

costs. The

investment

of

the

93. The UK introduces these tax reductions in order not to
energy-intensive
competitiveness
endanger
industrial sectors,
the levy
would be an increase of their costs and for which the
levy is a competitive disadvantage in particular as there is
the
not tax harmonisation on energy consumption at
Community level.

for which the full rate of

of

94. The Commission notes

the CCL taxes energy
that
consumption. By increasing the costs for energy, it will
contribute to a more efficient use of energy, and thereby
to the reduction of nuisable CO2 emissions and will thus
environmental
make an important
conditional on
protection. The
climate change agreements. These agreements establish
emission reduction targets and energy efficiency targets,
which will contribute to the same objective as the tax
itself. They thus do not undermine the general objective
of the tax pursued.

contribution for

tax reductions

are

for

extra

production

compensate

95. According to point 3.4 of the guidelines, the aid must
by
only
costs
that
comparison with traditional costs. This means
point 3.4. only justifies
to avoid additional burden
through new taxes for certain companies compared to
the status quo, but does
thus not cover any net
benefits. The notified aid elements in the CCL do not
amount to a complete exemption covering the total tax
increase through the law, but companies are left with a
contribution of their own. Consequently, there will be no
overcompensation, since all companies benefiting from
the aid measures will still have to pay more tax than
before.

96. The Commission notes

the agreement

is of a
that
temporary nature, in so far as it has been notified for a
period of 10 years. Such agreements may relate, among
other things, to a reduction in energy consumption or a
reduction in emissions. The tax reductions are conditional
on the associations of firms or companies entering into
climate change agreements, which pursue the objectives
required by the guidelines.

97. The Commission notes that under point 3.4 of

temporary relief

the
guidelines,
from new environmental
taxes may be authorized where it is necessary to offset
international
losses in competitiveness, particularly at
into a
level. Without
detailed analysis,
that
comparable environmental taxes do not yet exist in all
other Member States and third countries with which the
United Kingdom is competing, although it is not excluded
that such taxes may be introduced in the future.

the Commission has no doubt

it being necessary to enter

98. Point 3.4, first paragraph of the guidelines also provides
that State aid in the form of relief from environmental
taxes should be in principle degressive. The guidelines
thus foresee, where appropriate,
the possibility of an
exception to this rule. In the present case, the aid does
not at this time contain any element of degressivity, other
than the fact that the underlying logic of the aid is that it
should be temporary and other than the fact that it will
only be authorized until July 2002. The Commission has
nevertheless decided to approve the aid, particularly
having regard to its existing practice regarding the inter-
pretation of this part of the guidelines.

99. For the above reasons, the Commission considers that the
tax reductions under the climate change agreements fulfill
the requirements of the 1994 Community guidelines on
State aid for environmental protection (OJ C 72 of 10
March 1994), which continue to apply to the ECSC Treaty
its expiry at the end of July 2002, and is thus
until
compatible with Article 3 of the Steel Aid Code and
Article 4 of the ECSC Treaty. The Commission, therefore,
under the ECSC Treaty, as it does under the EC Treaty,
raises no objections to the proposed aid. However, this
decision to raise no objections is limited until the expiry
of the ECSC Treaty, at which time the United Kingdom is
invited to notify the measures in sufficient time to enable
the Commission to assess them in the light of
the
provisions that will apply to the steel sector.

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3.3.2. Exemption for dual-use fuels

4. CONCLUSION

100. Assuming

that

fuels
constitutes State aid, the Commission has doubts about
its compatibility with the guidelines.

exemption for

dual-use

the

101. The Commission notes that the provision exempts energy
consumption for some very energy intensive processes
runs
causing considerable CO2 emissions and thus
counter to the general objective of the tax, namely the
reduction of CO2 emissions.

102. The Commission notes

that
temporary, nor is it degressive.

the exemption is not

the

requirements of

106. The Commission concludes that the levy reductions for
companies covered by the climate change agreements
the 1994 Community
fulfill
guidelines on State aid for environmental protection (OJ
C 72 of 10 March 1994), which continue to apply to the
ECSC Treaty until its expiry at the end of July 2002, and
is thus compatible with Article 3 of the Steel Aid Code
and Article 4 of the ECSC Treaty. This decision to raise
no objections is limited until the expiry of the ECSC
Treaty, at which time the United Kingdom authorities
are invited to notify the measures in sufficient time to
enable the Commission to assess them in the light of the
provisions that will apply to the steel sector.

103. The Commission notes that the exemption is not made
conditional on the conclusion of agreements in order to
achieve environmental protection objectives, nor is the
tax subject to conditions that have the same effect as
agreements.

107.

104. The UK has not demonstrated that firms eligible for the
exemption must nevertheless pay a significant proportion
of the national tax and that it is not merely compensating
for extra production costs.

105. For the above reasons, the Commission has doubts that
the dual-use exemption is compatible with the guidelines.

the

light of

foregoing considerations,

In the
the
Commission, acting under the procedure laid down in
Article 6(5) of the Steel Aid Code, requests the United
Kingdom to submit its comments and to provide all such
information as may help to assess the exemption on
dual-use fuels, within one month of the date of receipt
of this letter. It requests your authorities to forward a
copy of this letter to the potential recipient of the aid
immediately.

108. The Commission wishes to remind the United Kingdom
that Article 6(4) of the Steel Aid Code has suspensory
effect, and provides
that all unlawful aid may be
recovered from the recipient.(cid:146)