2002/266/EC: Council Decision of 25 March 2002 authorising France to apply a differentiated rate of excise duty to biofuels in accordance with Article 8(4) of Directive 92/81/EEC
Date: 2002-03-25
Institutions: Council of the European Union
Subjects: France, environmental protection, excise duty, motor fuel, security of supply, substitute fuel

L 92/22

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Official Journal of the European Communities

9.4.2002

COUNCIL DECISION

of 25 March 2002

authorising France to apply a differentiated rate of excise duty to biofuels in accordance with
Article 8(4) of Directive 92/81/EEC

(2002/266/EC)

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)

(4)

(5)

By letter dated 17 November 2000, France requested
authorisation to apply a differentiated rate of excise duty
to vegetable oil esters
incorporated into domestic
heating fuel and diesel, and to ethyl alcohol derivatives
(where the alcohol component is of agricultural origin)
incorporated into premium grade or regular petrol. The
ethyl alcohol derivative principally concerned is ethyl
tertiary butyl ether (ETBE), an oxygenated compound
made up of alcohol of agricultural origin and of isobu-
tene, a product resulting from oil refining.

Following the Commission's requests for further infor-
mation, France supplied the details necessary for exam-
ination of the matter in letters dated 18 January and 21
February 2001.

The other Member States have been notified of this
request.

The Commission had to ask for the matter to be raised
by the Council, by letter dated 19 April 2001, in accord-
ance with the third paragraph of Article 8(4) of Directive
92/81/EEC.

stresses

substitute fuel components

The Commission and the Council have been encour-
aging the development of
renewable energies, and
biofuels in particular, since 1985. Council Directive 85/
536/EEC of 8 December 1985 on crude oil savings
through the use of
in
in reducing
petrol (2)
Member States' dependence on oil imports and author-
ises the incorporation into petrol of up to 5 % of
ethanol by volume and up to 15 % of ETBE by volume.
Under Council Decisions 93/500/EEC (3)
and 98/
352/EC (4) and Decision 646/2000/EC of the European
Parliament
the Altener
programme on promoting renewable energies in the

the role of biofuels

the Council (5),

and

of

(1) Directive published in OJ L 316, 31.10.1992, p. 12. Directive as
last amended by Directive 94/74/EC (OJ L 365, 31.12.1994, p. 46).
(2) Directive published in OJ L 334, 12.12.1985, p. 20. Directive as
last amended by Directive 87/441/EEC (OJ L 238, 21.8.1987, p.
40).

(3) OJ L 235, 18.9.1993, p. 41.
(4) OJ L 159, 3.6.1998, p. 53.
(5) OJ L 79, 25.10.2000, p. 1.

Community was adopted with the aim of securing a
market share for biofuels of 5 % of total motor vehicle
fuel consumption by 2005. The 1997 White Paper on
renewable sources of energy further
recommended
setting an objective of the production of 18 million
tonnes of liquid biofuels by 2010 as part of an overall
goal of doubling the share of renewables in EU energy
consumption by the same year. The Commission's
Green Paper Towards a European strategy for energy
supply security stresses the key role of tax instruments
in achieving these aims by reducing the difference in
cost price between biofuels and competing products. On
12 March 1997, the Commission submitted a proposal
for a directive restructuring the Community framework
for the taxation of energy products which envisages the
possibility of an exemption for biofuels outside the
context of a pilot project within the meaning of Article
8(2)(d) of Directive 92/81/EEC. Lastly, on 7 November
2001, the Commission adopted an action plan and two
proposals for directives on encouraging the use of
substitute fuels in the transport sector, starting with
regulatory and tax measures designed to promote
biofuels.

(6)

(7)

(8)

The exemption requested by the French authorities is
therefore in line with the Community's policy of devel-
oping the biofuel sector, in the interests of protecting
the environment and ensuring security of energy supply.

The French legal arrangement is based on Article 25 of
the amending finance law of 1997, on Decree No 98-
309 of 22 April 1998 laying down the requirements for
participation in the invitation to tender for the release
for home use in France of biofuels giving rise to a
reduction in domestic consumption tax, and on the
decision of 22 April 1998 setting up the Committee for
the examination of authorisation requests by biofuel
production units.

This arrangement, which has been in force since 1
November 1997, was established on the basis of the
Commission decision of 9 April 1997 (hereinafter ‘the
decision of 9 April 1997’) declaring that the domestic
tax reductions on vegetable oil esters and ETBE consti-
tuted State aid compatible with the common market.
The 1997 decision stated that the scheme concerned
qualified as a pilot project.

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Official Journal of the European Communities

L 92/23

(9)

The 1997 French legal arrangement for the differentiation of excise duties (hereinafter ‘the 1997
arrangement’
is not limited in time. It provides for the issue by the French authorities of an
authorisation allowing a reduction in excise duties for approved warehousekeepers carrying out the
mixing of biofuels and mineral oils. Authorisations are granted for a period of three to nine years
from the date of issue.

(10) Details of the 1997 arrangement are given in the table below:

Common factors

Vegetable oil esters

Ethyl alcohol derivatives

Number of beneficiaries

Depends on the number of requests
for authorisation deemed eligible by
the Examining Committee

Five factories authorised

Three

factories

authorised

Amount of
beneficiary

reduction per

Depends on the volume authorised

(FRF 230)/hl
EUR 35,06
EUR 396,64 (FRF 2 601,8)/t

or

EUR 50,23
EUR 297,35

(FRF 329,5)/hl

or
(FRF 1 950,5)/t

Annual budgetary expendi-
ture anticipated

Volume of 350 000 t proposed at
first invitation to tender in 1997: a
ceiling of FRF 911 million.

actually

Authorisation
granted:
317 500 t; maximum annual
expenditure of FRF 826 million.

Volume of 270 000 t of
ETBE
proposed at first invitation to tender
in
of
a
1997:
FRF 527 million.

ceiling

Authorisation
granted:
219 000 t; maximum annual expen-
diture of FRF 427 million.

actually

(11)

The 1997 arrangement complies with the minimum rates of excise duty referred to in Articles 3, 4
and 5 of Council Directive 92/82/EEC of 19 October 1992 on the approximation of the rates of
excise duties on mineral oils (1), as indicated in the following table:

Vegetable oil esters

Vegetable oil esters

Ethyl alcohol derivatives

Condition of use

incorporated into diesel
(5 %)

incorporated
heating fuel (5 %)

into

incorporated
into
unleaded premium grade
(15 %)
petrol

Community minimum

EUR 245/1 000 l

EUR 18/1 000 l

EUR 287/1 000 l

Effective
excise
applied to mixture

rate

FRF 2 436,8/1 000 l
EUR 371,8/1 000 l

FRF 245,0/1 000 l
EUR 37,4/1 000 l

FRF 3 352,0/1 000 l
EUR 511/1 000 l

(12) On the entry of biofuels into refineries under customs
control
(tax production or storage warehouse) where
they are to be incorporated into petroleum products, an
exemption certificate is issued to the operator carrying
out the operation for an amount corresponding to the
volume received multiplied by the exemption rate. These
certificates are then set against the declarations of release
for home use of petroleum products.

(13) Where the mixing is carried out in a Member State other
than France, the document accompanying the product
states that the petroleum product contains a biofuel and
specifies its nature. When the excise duty falls due in
France, an exemption certificate is issued for an amount
corresponding to the volume of biofuel contained in the
petroleum product multiplied by the exemption rate.

(14)

The exemption requested under Article 8(4) of Directive
92/81/EEC is based on the 1997 arrangement. However,
it will be adapted to take account both of this Decision

(1) Directive published in OJ L 316, 31.10.1992, p. 19. Directive as
last amended by Directive 94/74/EC (OJ L 365, 31.12.1994, p. 46).

and the Commission's final decision on the compatibility
of the State aids to promote biofuels.

(15)

Exceptionally, in view of the specific and unique circum-
stances of the case, this Decision must be applied with
effect from 1 November 1997 and relate also to the
exemptions granted since the entry into force of the
1997 arrangement.

(16) According to the decision of 9 April 1997, the domestic
tax reductions on vegetable oil esters and ETBE consti-
tuted State aid compatible with the common market.
That decision stipulated that the scheme concerned qual-
ified as a pilot project and therefore came within the
scope of Article 8(2)(d) of Directive 92/81/EEC which
allows Member States to apply for exemptions or reduc-
tions in the rate of excise duty applied to mineral oils
used in the field of pilot projects for the technological

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Official Journal of the European Communities

9.4.2002

(17)

(18)

in relation to fuels

development of more environmentally-friendly products,
in particular
from renewable
resources. A specific decision authorising differentiated
rates of excise duty based on Article 8(4) of Directive
92/81/EEC was not therefore considered necessary. In
the light of the legal context and the Community legisla-
tive policy referred to in the fifth recital above, therefore,
the economic operators who received the domestic tax
reductions provided for by the 1997 arrangement can
be considered as having acted in good faith.

In its judgment of 27 September 2000 in Case T-184/87
the Court of First
(BP Chemicals v. Commission) (1)
Instance of the European Communities annulled the part
of the decision of 9 April 1997 relating to the ETBE
sector.

That case related to an application to annul the decision
of 9 April 1997 submitted by BP Chemicals, the main
European producer of synthetic ethanol. The Court
the
dismissed as inadmissible the application against
1997 decision as that decision related to measures
applicable to the esters sector. The Court concluded that
the measures relating to the esters sector did not bring
about a significant change in the applicant's legal situa-
In
tion and consequently did not affect its interests.
relation to the measures applicable to the ETBE sector,
the Court considered that the Commission had infringed
Article 8(2)(d) of Directive 92/81/EEC by deciding that
the contested scheme could be regarded as a pilot
project within the meaning of that Article. The Court
concluded that, by infringing Article 8(2)(d) of Directive
92/81/EEC, the Commission had exceeded the powers
conferred on it by Article 93(3) of the Treaty.

(22)

(23)

the partial
the logical consequence of
accordingly,
annulment of the Commission decision of 9 April 1997
insofar as it puts the exemption into the appropriate
procedural framework.

Following the Court's ruling, on 29 November 2000 the
Commission initiated the procedure provided for by
Article 88(2) of the Treaty in relation to State aid C
64/2000 (French biofuels) (2) concerning the ETBE
sector. The French national legal arrangement is being
examined in this context with effect from its entry into
force on 1 November 1997.

Exemptions unlimited in time cannot be authorised. A
period of six years is sufficient in economic terms to
meet the planning needs of investment projects in the
case in question. Individual exemptions of a maximum
duration of six years from the date of
issue of the
authorisation would be appropriate for biofuel produc-
tion units. The biofuel production units must have
received authorisation from the French authorities by 31
December 2003 at the latest.

(24) Distortions of competition should be limited and the
incentive of a reduction in costs for producers and
distributors of biofuels maintained, in particular by the
implementation of excise reduction mechanisms adapted
to changes in raw material prices.

(25)

reductions and
The Commission regularly reviews
they do not distort
exemptions
to check
the internal
competition or hinder the operation of
market and are not
incompatible with Community
policy on protection of the environment, energy and
transport,

that

(19)

Paragraph 78 of the Court's judgment states that there is
no reason why a decision cannot be adopted by the
in accordance with Article 8(4) of Directive
Council
92/81/EEC on tax exemption schemes to promote the
market penetration of biofuels. The Court did not there-
fore find the exemption illegal on substantive grounds
but considered that the procedure in Article 8(4) of the
Directive should be applied.

HAS ADOPTED THIS DECISION:

Article 1

(20) As a result of the annulment of the part of the decision
of 9 April 1997 relating to the ETBE sector, therefore,
that part of the dossier reverts in law to the stage prior
to the adoption of the annulled decision, i.e. in 1997.

(21) Moreover, even if

that part of

judgment does not
the Court's
concern the esters sector, on account of the inadmissi-
bility of
it nevertheless
seems logical that the measures applicable to the esters
sector would likewise not be part of pilot projects within
the meaning of Article 8(2)(d) of Directive 92/81/EEC.
The current application by the French authorities is,

the application,

1.
France is hereby authorised to grant permits for the
application of a differentiated rate of excise duty to the fuel
mixture ‘petrol/ethyl alcohol derivatives whose alcohol compo-
nent is of agricultural origin’.

2.
France is hereby authorised to grant permits for the
application of a differentiated rate of excise duty to the fuel
mixture ‘diesel/vegetable oil esters’.

3.
To allow a reduction in excise duty on blends incorpor-
ating vegetable oil esters and ethyl alcohol derivatives which
are used as fuel within the meaning of Directive 92/81/EEC, the
French authorities must issue the necessary permits to the
biofuel production units concerned by 31 December 2003 at
the latest.

(1) 2000 ECR II-3145

(2) OJ C 60, 24.2.2001, p. 4.

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The authorisations will be valid for a maximum of six years
from the date of issue.

The reduction specified in the authorisation may be applied
after 31 December 2003 until the expiry of the authorisation.
It may not be extended.

The

reductions

in excise duties

4.
exceed
EUR 35,06/hl or EUR 396,64/t for vegetable oil esters and
EUR 50,23/hl or EUR 297,35/t for ethyl alcohol derivatives
used in the mixtures referred to in paragraph 1.

shall not

The

reductions

exceed
3.
EUR 35,06/hl or EUR 396,64/t for the vegetable oil esters
used in the mixtures referred to in paragraph 1.

in excise duties

shall not

4.
The rates of duty applicable to the mixture referred to in
paragraph 1 must comply with the terms of Directive 92/
82/EEC, and in particular the minimum rate laid down in
Article 3 thereof.

Article 3

5.
The rates of duty applicable to the mixtures referred to in
paragraph 1 must comply with the terms of Directive 92/
82/EEC, and in particular the minimum rates laid down in
Articles 4 and 5 thereof.

The reductions in excise duty shall be adjusted to take account
of changes in the price of raw materials to avoid over-compen-
sating for the extra costs involved in the manufacture of
biofuels.

Article 2

Article 4

1.
France is hereby authorised to grant permits for the
application of a differentiated rate of excise duty to the mixture
‘domestic heating fuel/vegetable oil esters’.

2.
To allow a reduction in excise duty on blends incorpor-
ating vegetable oil esters and used as fuel within the meaning
of Directive 92/81/EEC, the French authorities must issue the
necessary permits to the biofuel production units concerned by
31 December 2003 at the latest.

The authorisations will be valid for a maximum of six years
from the date of issue.

The reduction specified in the authorisation may be applied
after 31 December 2003 until the expiry of the authorisation,
but may not be extended.

This Decision shall apply with effect from 1 November 1997.

It shall expire on 31 December 2003.

Article 5

This Decision is addressed to the French Republic.

Done at Brussels, 25 March 2002.

For the Council

The President

A. M. BIRULÉS Y BERTRÁN