Proposal for a Council Decision authorising Denmark to apply a differentiated rate of excise duty to heavy fuel oil and heating oil used by certain firms, in accordance with Article 8(4) of Directive 92/81/EEC
Date: 2002-01-07
Institutions: European Commission
Subjects: Denmark, excise duty, fuel oil, heating, type of business

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 07.01.2002
COM(2001) 809 final

Proposal for a

COUNCIL DECISION

authorising Denmark to apply a differentiated rate of excise duty
to heavy fuel oil and heating oil used by certain firms, in accordance with Article 8(4) of
Directive 92/81/EEC

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. 

SUBMISSION OF REQUEST

By  letter  of  2  August  2001,  Denmark  applied  for  permission  under  Article  8(4)  of  Council
Directive  92/81/EEC  of  19  October  1992  on  the  harmonisation  of  the  structures  of  excise
duties  on  mineral  oils,1  to  apply  a  differentiated  rate  of  excise  duty  to  heavy  fuel  oil  and
heating oil used by energy-intensive firms to produce heating and hot water. In response to a
request  for  further  information,  the  Commission  received  the  final  details  it  required  to
examine the application on 11 October 2001.

In  1995,  the  Danish  Parliament  adopted  a  package  of  environmentally  friendly  measures
which  required  all  firms  to  pay  a  tax,  as  from  1998,  on  the  energy  that  they  consumed  to
produce heating and hot water.

In 1998, it also raised the excise duty on electricity and fuel used to produce heating and hot
water by almost 20%. The increase was phased in between 1998 and 2001.

In 1999, it was discovered that firms were paying much higher taxes on heating than had been
foreseen when the scheme was adopted in 1995. In 2000, the amount should have been DKK
910 million (EUR 122 million) whereas, according to a December 2000 estimate, firms would
in fact pay 1 350 million kroner (EUR 181 million) that year in taxes on heating, i.e. almost
50% more than had originally been intended.

In  December  1999,  therefore,  the  Danish  Parliament  adopted  a  law2  allowing  firms
consuming large amounts of energy on heating and hot water to obtain a reduction on the CO2
and  energy  taxes.  However,  each  firm  had  to  agree  to  undertake  investments  designed  to
improve the energy efficiency of their heating and hot water installations.

The  reduction  in  excise  duty  amounts  to  22%  of  the  CO2/energy  tax  on  the  production  of
heating and hot water:

Heavy fuel oil Heating oil

Tax before energy-saving agreement

32 øre / kg

27 øre / litre

Tax after energy-saving agreement

24.96 øre / kg

21.06 øre / litre

The  reduced  rates  applied  are  higher  than  the  minimum  rates  laid  down  by  Community
legislation.

The  differentiation  is  designed  partly  to  compensate  for  the  fact  that  the  tax  on  heating  is
much higher than originally intended when the package of green measures was adopted.

To qualify for the reduced rate of excise duty, firms must pay taxes on heating which exceed
2% of the growth in their value added (value of sales minus purchases, but equal to at least
10%  of  sales).  According  to  forecasts,  some  60  to  80  firms  should  be  willing  to  agree  to

1

2

Directive published in OJ L 316, 31.10.1992, p. 12, as last amended by Directive 94/74/EC (OJ L 365,
31.12.1994, p. 46).
The legal basis is Law No 1107 of 29 December 1999.

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improve their energy efficiency and therefore qualify for the proposed subsidy. These include
both energy-intensive manufacturers and other firms in the business and service sectors.

The scheme should result in estimated subsidies of between DKK 20 to 25 million per  year
(EUR 2.7 to 3.4 million).

The Commission has decided that, with the exception of the agricultural component which is
still  being  studied,  the  scheme  in  question  is  compatible  with  the  State  aid  rules  on
environmental protection.3

The Ministry of Energy and the Environment is authorised to fix the date of entry into force
of  the  law  as  soon  as  it  receives  the  Commission's  approval.  The  planned  duration  of  the
scheme is ten years which corresponds to the period of validity of the authorisation given by
the Commission under the State aids rules.

The  current  subsidy  scheme  is  submitted  to  the  Commission  in  accordance  with  the
Community State aid rules. The Commission approved the scheme on 6 June 2001 pursuant
to 
involving  environmental  protection
(N 840/A/2000). Those parts of the scheme applicable to the agricultural sector are in keeping
with the guidelines on State aids in that sector.

the  Community  guidelines  on  State  aids 

2. 

EVALUATION BY THE COMMISSION

Under  Article  8(4)  of  Council  Directive  92/81/EEC,  the  Council,  acting  unanimously  on  a
proposal  from  the  Commission,  may  authorise  any  Member  State  to  introduce  further
exemptions or reductions of excise duties for specific policy considerations.

By letters dated 2 August 2001 and 11 October 2001, Denmark applied for permission under
Article 8(4) of Directive 92/81/EEC to apply a differentiated rate of excise duty to heavy fuel
oil and heating oil used by energy-intensive firms to produce heating and hot water.

In  accordance  with  the  abovementioned  Directive,  the  other  Member  States  have  been
notified of this request.

3

Commission decision of 6 June 2001 on dossier N/840/A/2000 (letter SG(2001) 289001).

3

                                                
The financial details of the application are as follows:

Community minimum

Tax before energy-saving agreement

Tax after energy-saving agreement

Differentiation

Heavy fuel oil
(1000 kg)

Heating oil
(1000 l)

€13

DKK 3205
€43.0

€04

DKK 270
€36.3

DKK 249.6
€33.5

DKK 210.6
€28.3

DKK 70.4
€9.5

DKK 59.4
€8.0

This  complies  with  the  minimum  Community  rates  specified  in  Articles  5  and  6  of
Directive 92/82/EEC.

Moreover,  the  Commission  has  examined  the  measure  notified  by  the  Danish  authorities  in
the light of Articles 87 and 88 of the EC Treaty. The Commission has concluded that, apart
from the agricultural component, the aid in question is compatible with the common market.

As  regards  the  agricultural  component  of  the  application,  Article  8(2)(f)  of  Directive
92/81/EEC states that, without prejudice to other Community provisions, Member States may
apply total or partial exemptions or reductions in the rate of duty to mineral oils used under
fiscal  control  exclusively  in  agricultural  and  in  horticultural  works.  A  derogation  under
Article  8(4)  of  the  Directive  is  consequently  not  necessary  for  the  excise  duty  exemptions
proposed  by  the  Danish  authorities  for  mineral  oils  used  exclusively  in  agricultural  works.
The  granting  of  aid  to  the  agricultural  sector  therefore  depends  on  the  prior  decision  of  the
Commission  under  Article  87  of  the  Treaty  and  requires  no  specific  authorisation  from  the
Council on a proposal from the Commission.

To  enable  the  Commission  and  the  Council  to  periodically  review  exemptions  granted
pursuant  to  Article  8(4)  of  Directive  92/81/EEC  and  exercise  a  reasonable  level  of  control,
specific exemptions are allowed in practice for a maximum of six years.

Lastly,  the  Commission  considers  that  differentiation  of  excise  duty  is  in  keeping  with  the
overall context of environmental  protection policy. The  Commission  notes in particular  that
the reduce rate is granted only to firms which agree to improve their energy efficiency.

3. 

DECISION

In  accordance  with  Article  8(4)  of  Directive  92/81/EEC,  the  Commission  proposes  that  the
Council  decide  to  authorise  Denmark  to  apply  a  differentiated  rate  of  excise  duty  of  a

4

5

In  accordance  with  the  second  paragraph  of  Article  5(3)  of  Directive  92/82/EEC.  In  Denmark  the
minimum charge is DKK 50 (€6.7) for 1000 litres of heating oil.
€1 is DKK 7.44 at the average exchange rate for October 2001.

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maximum  of  €0.0095  per  kg  to  heavy  fuel  oil  and  of  €0.008  per  litre  to  heating  oil  for  a
period of six years starting on 1 February 2002.

The  reduced  rates  of  duty  must  comply  with  the  terms  of  Council  Directive  92/82/EEC  of
19  October  1992  on  the  approximation  of  the  rates  of  excise  duties  on  mineral  oils,  and  in
particular the minimum rates laid down in Articles 5 and 6 thereof.

This  proposal  does  not  concern  heavy  fuel  oil  and  heating  oil  used  exclusively  for  the
purposes referred to in Article 8(2)(f) of Directive 92/81/EEC.

5

Proposal for a

COUNCIL DECISION

authorising Denmark to apply a differentiated rate of excise duty
to heavy fuel oil and heating oil used by certain firms, in accordance with Article 8(4) of
Directive 92/81/EEC

(only the Danish text is authentic)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of
the structures of excise duties on mineral oils,1 and in particular Article 8(4) thereof,

Having regard to the proposal from the Commission,

Whereas:

(1) 

(2) 

(3) 

Denmark  has  requested  authorisation  to  apply  a  differentiated  rate  of  excise  duty  to
heavy fuel oil and heating oil used by energy-intensive firms to produce heating  and
in  Article  8(2)(f)  of
hot  water,  excluding 
Directive 92/81/EEC.

the  mineral  oils 

referred 

to 

The other Member States have been notified of Denmark's request.

The aim of the differentiated rate of duty is partly to compensate for the fact that the
actual tax is much higher than was intended when the national measures were adopted
increasing  the  CO2  and  energy  taxes  on  the  use  of  heavy  fuel  oil  and  heating  oil  to
produce heating and hot water.

1

Directive published in OJ L 316, 31.10.1992, p. 12, as last amended by Directive 94/74/EC (OJ L 365,
31.12.1994, p. 46).

6

                                                
(4) 

The reduced rate is  granted to  firms which  agree  to  improve their energy  efficiency.
The financial details of the application are as follows:

Heavy fuel oil
(1000 kg)

Heating oil
(1000 l)

Community minimum

€13

€0

Tax before energy-saving agreement

Tax after energy-saving agreement

Differentiation

DKK 320
€43.0

DKK 270
€36.3

DKK 249.6
€33.5

DKK 210.6
€28.3

DKK 70.4
€9.5

DKK 59.4
€8.0

The zero-rate for heating oil is authorised by the second paragraph of Article 5(3) of Council
Directive 92/82/EEC of 19 October 1992  on  the  approximation of the rates of  excise duties
(92/82/EEC)  on  mineral  oils.2  In  Denmark,  the  monitoring  charge  is  DKK  50  (€6.7)  per
1000 litres of heating oil.

(5) 

(6) 

(7) 

(8) 

(9) 

The differentiated  rate of  excise duty  proposed  by  Denmark  therefore  complies  with
the minimum rates referred to in Articles 5 and 6 of Directive 92/82/EEC.

The  requested  exemption  is  in  keeping  with  environmental  policy.  In  particular,  the
reduced rate is granted only to firms which agree to improve their energy efficiency.

On  the  basis  of  information  available,  except  for  the  agricultural  sector,  the
Commission and all the Member States consider that the application of differentiated
rates of excise duty to heavy fuel oil and heating oil will not result in a distortion of
competition  contrary  to  the  common  interest  nor  will  it  hinder  the  operation  of  the
internal market.

The exemptions should be granted for a limited duration. A period of six years, with
the possibility of an extension, is compatible with the requirements of Community tax
policy.

The Commission regularly reviews reductions and exemptions to check that they will
not distort competition, hinder the operation of the internal market or be incompatible
with Community policy on protection of the environment.

HAS ADOPTED THIS DECISION:

Article 1

Denmark is authorised to apply a differentiated rate of excise duty, from 1 February 2002 to
31 January 2008, to heavy fuel oil and heating oil used by energy-intensive firms to produce
heating and hot water.

2

Directive published in OJ L 316, 31.10.1992, p. 19, as last amended by Directive 94/74/EC.

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The maximum amount of the authorised differentiation in the excise duty is €0.0095 per kg on
heavy fuel oil and €0.008 per litre on heating oil.

Article 2

The reductions in excise duty referred to in Article 1 must comply with the terms of Council
Directive  92/82/EEC,  and  in  particular  the  minimum  rates  laid  down  in  Articles  5  and  6
thereof.

This decision shall be without prejudice to Article 8(2)(f) of Directive 92/81/EEC.

Article 3

This Decision shall expire on 31 January 2008.

Article 4

Article 5

This Decision is addressed to the Kingdom of Denmark.

Done at Brussels,

For the Council
The President

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