Proposal for a Council Decision authorising Sweden to apply a differentiated rate of energy tax to alkylate based petrol for two-stroke engines in accordance with Article 8(4) of Directive 92/81/EEC
Date: 2002-07-09
Institutions: European Commission
Subjects: Sweden, derogation from EU law, engine, environmental protection, environmental tax, excise duty, petrol, public health, social policy, tax

29.10.2002

EN

Official Journal of the European Communities

C 262 E/421

Proposal for a Council Decision authorising Sweden to apply a differentiated rate of energy tax to
for two-stroke engines in accordance with Article 8(4) of Directive
alkylate based petrol

92/81/EEC

(2002/C 262 E/29)

COM(2002) 365 final

(Submitted by the Commission on 9 July 2002)

EXPLANATORY MEMORANDUM

1. Submission of request

1.1. By letter of 22 April 2002, the Swedish authorities applied to the Commission for a derogation
allowing them to apply an energy tax differentiation on alkylate based petrol for two-stroke engines
in accordance with Article 8(4) of Directive 92/81/EEC (1).

In order to obtain the information it required to evaluate the request, the Commission sent an
additional question on 14 May 2002 to which the Swedish authorities replied on 16 May 2002.
The reply of the Swedish authorities enabled the Commission to finalise its evaluation of the
application for a derogation.

1.2. Sweden proposes to amend the law (1994:1776) on energy taxation to introduce a lower rate of
energy tax for alkylate based petrol for two-stroke engines with effect from 1 July 2002 or a later date
determined by the Government when approval has been obtained from the EU. This measure is
designed to improve the environment and public health by increasing the use of the cleaner alkylate
based petrol for two-stroke engines through reducing the energy tax rate on this fuel relative to
normal petrol for two-stroke engines to compensate for the higher production costs of alkylate based
petrol.

In Sweden the total excise duty on mineral oil products is composed of two elements, the energy tax
and the CO2 tax.

Sweden already applies excise duty differentiation according to environmental classes (miljöklasser) of
fuel. The differentiated rates were introduced to promote the production and use of cleaner fuels, and
so improve air quality and public health. The system has been very successful.

Sweden now wishes to encourage the production and use of alkylate based petrol for two-stroke
engines by introducing a further lower duty rate. Sweden plans to set the rate of energy tax for
alkylate based petrol for two-stroke engines at 1,50 Swedish crowns per litre below that of motor
petrol (motor bensin) of environmental class 1. This equates to an energy tax duty of 1,66 Swedish
crowns (18 eurocent (2)) per litre at current rates. The total excise duty rate (including CO2 tax) is
then 3,12 Swedish crowns (33,9 eurocent) per litre.

The Swedish authorities are intending to introduce the reduced rate of duty with effect from July
2002 until further notice. The duty forgone as a result of the duty reduction is estimated to some 100
million Swedish crowns (11 million euro) per annum.

1.3. Production costs of alkylate based petrol

for two-stroke engines exceed those of conventional
two-stroke petrol, and its retail price would therefore be uncompetitive without the duty reduction.
The duty reduction is simply intended to offset the additional production costs. By removing this
disparity, it will enable alkylate based petrol for two-stroke engines to be sold at a similar pump price
to conventional two-stroke petrol.

The Swedish government will keep control over prices so that the price of alkylate petrol will not fall
below the price of conventional petrol.

(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).

(2) The exchange rate is rounded off to 9,20 SKR for one euro.

C 262 E/422

EN

Official Journal of the European Communities

29.10.2002

1.4. The requested energy tax reduction is foreseen for alkylate based petrol for two-stroke engines
(Motorbränslen — Specialbensin för motordrivna arbetsredskap, Tvåtaktsbränsle) that fulfils the cri-
teria of Swedish Standard (SS) 15 54 61 (2nd issue) (1).

Some of the most important limits of the abovementioned standard are:

— Lead: maximum 0,002 g/l

— Sulphur: maximum 50 mg/kg

— Olefins: maximum 0,5 volume %

— Aromatic hydrocarbons: maximum 0,5 volume %

— Benzene: maximum 0,1 volume %.

These limits are far below the limits given in Annexes I and III to Directive 98/70/EC (2), the
distillation requirements for fuels established in this Directive are also observed.

1.5. Provided that the fuel concerned meets the abovementioned standard for alkylate based petrol for
two-stroke engines the duty reduction will be granted to any producer of alkylate based petrol in the
Member States (or third countries) whose product is put on the market in Sweden. The Swedish
authorities estimate the annual volume as some 40 000 m3 in 2005.

1.6. The promotion of alkylate based petrol for two-stroke engines is a measure to improve environment
and health, as the unburnt fuel part of exhaust fumes of two-stroke engines contains considerable
lower amounts of aromatic hydrocarbons and olefins, including benzene in comparison to conven-
tional fuel.

2. Evaluation by the Commission

2.1. 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.

The Swedish authorities have applied to the Commission for derogations allowing them to apply a
differentiated rate of energy tax to alkylate based petrol for two-stroke engines in accordance with
Article 8(4) of Directive 92/81/EEC (3).

As required by Directive 92/81/EEC, the other Member States have been informed of Sweden’s
request.

2.2. Exemptions requested under Article 8(4) of Directive 92/81/EEC must be examined in terms of their

compliance with Community policies.

Since the 1970s the EU has adopted more and more ambitious limits for emissions of vehicles and
specifications of fuels to improve the air quality as one of the measures to protect the environment
and health. The Communication from the Commission to the Council, the European Parliament and
the Economic and Social Committee on Tax policy in the European Union — Priorities for the years
ahead (4), as well as the 6th Environmental Action Programme (5), and the White Paper on
Transport (6) stipulate fiscal measures as one of the instruments for better incorporation of environ-
mental and health aspects into all policy areas.

(1) Could be obtained from: SIS Förlag AB, Box 6455, S-113 82 Stockholm.
(2) OJ L 350, 28.12.1998, p. 58.
(3) 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).

(4) COM(2001) 260 final.
(5) COM(2001) 31 final and amendments in the decision procedure of Council and EP.
(6) COM(2001) 370 final.

29.10.2002

EN

Official Journal of the European Communities

C 262 E/423

The tax reduction requested by the Swedish authorities is therefore in line with the Community's
policy of promoting cleaner fuels in the interests of protecting the environment and health.

The Commission notes that the effective total excise duty rates for alkylate based petrol are higher
than the minimum Community rates applicable:

Community minimum
(per 1 000 l) (1)

EUR 287

Energy tax
(per 1 000 l)

EUR 181 (2)

SKR 1 660

CO2-tax
(per 1 000 l)

EUR 159

SKR 1 460

Total excise duty
(per 1 000 l)

EUR 339

SKR 3 120

(1) In accordance with Directive 92/82/EEC (OJ L 316, 31.10.1992, p. 19), as last amended by Directive 94/74/EC (OJ L 365,

31.12.1994, p. 46).

(2) The exchange rate is rounded off to SKR 9,20 for one euro.

The Swedish government will keep control over prices so that the price of alkylate petrol will not fall
below the price of conventional petrol.

The tax differentiation requested from Sweden is not yet of determined duration until further notice.
To keep derogations granted under Article 8(4) of Directive 92/81/EC and their justification under
surveillance, the Commission usually grants such derogations with a maximum duration of six years.

3. Decision

The Commission proposes that, under Article 8(4) of Council Directive 92/81/EEC, the Council authorises
Sweden to apply until 30 June 2008 differentiated rates of energy tax to alkylate based petrol for
two-stroke engines.

The reduction in energy tax must be adjusted to avoid over-compensating for the extra costs involved in
the manufacture of alkylate based petrol for two-stroke engines.

The rates of total excise duty applicable to the substances referred to above 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 (1), and in particular the minimum rates laid down in Article 4 thereof.

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

p. 46).

THE COUNCIL OF THE EUROPEAN UNION,

(2) The other Member States have been notified of

this

request.

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) Sweden has applied for a differentiated rate of energy tax
to be authorised on alkylate based petrol for two-stroke
engines. In Sweden the total excise duty on mineral oil
products is composed of two elements, the energy tax and
the CO2 tax.

(3) The derogation requested by the Swedish authorities is in
line with the Community's tax policy that inter alia must
reinforce EU policies on innovation, health and consumer
protection, sustainable development, environmental and
energy.

(4) The

energy tax rate

engines would be

for alkylate based petrol

for
two-stroke
set at 1,50 Swedish
crowns per litre below that for conventional Environ-
mental Class 1 petrol. This equates to an energy tax
duty of 1,66 Swedish crowns (18 eurocent (2))
litre of
for two-stroke engines. The total
alkylate based petrol
then 3,12
tax)
excise duty rate (including CO2
Swedish crowns (33,9 eurocent) per litre.

is

(1) 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) The exchange rate is rounded off to SKR 9,20 for one euro.

C 262 E/424

EN

Official Journal of the European Communities

29.10.2002

(5) The effective total rates of excise duty are higher than the
applicable Community minimum rates,
in accordance
with Council Directive 92/82/EEC of 19 October 1992
on the approximation of the rates of excise duties on
mineral oils (1).

(6) The requested energy tax reduction is foreseen for alkylate
based petrol
for two-stroke engines (Motorbränslen —
Specialbensin för motordrivna arbetsredskap, Tvåtakts-
bränsle) that fulfils the criteria of Swedish Standard (SS)
15 54 61 (2nd issue) (2) as well as the standards estab-
lished in Council Directive 98/70/EC (3).

(7) The differentiated rate would apply to alkylate based
petrol for two-stroke engines at the point of production
or import.

(8) Production costs of

for

alkylate based petrol

for
two-stroke engines exceed those of conventional petrol,
and its retail price would therefore be uncompetitive
without
energy tax
energy tax reduction. The
reduction is intended to offset the additional production
costs.
for
two-stroke engines to be sold at a pump price similar
to conventional petrol.

alkylate based petrol

It will

enable

the

for

(11) The Commission regularly

reviews

and
exemptions to check that they do not distort competition
or hinder the operation of the internal market and are not
incompatible with Community policy on protection of the
environment, health protection, energy and transport,

reductions

HAS ADOPTED THIS DECISION:

Article 1

1.
In accordance with Article 8(4) of Directive 92/81/EEC
Sweden is authorised to apply a differentiated rate of energy
tax to alkylate based petrol for two-stroke engines.

The rate of total excise duty applicable to the product
2.
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 4 thereof.

Article 2

Based on a regular review by the Swedish authorities,
the
reduction in energy tax shall be adjusted to avoid over-
compensating for the extra costs involved in the manufacture
of alkylate based petrol.

(9) The government of Sweden intends to regularly review
the production cost of
for
two-stroke engines and thus monitor that no overcom-
pensation takes place.

for alkylate based petrol

(10) The accorded authorisation should apply for a period of

Article 3

This Decision shall expire on 30 June 2008.

Article 4

six years.

This Decision is addressed to Sweden.

(1) OJ L 316, 31.10.1992, p. 19. Directive as last amended by

Directive 94/74/EC.

(2) Could be obtained from: SIS Förlag AB, Box 6455, S-113 82

Stockholm.

(3) OJ L 350, 28.12.1998, p. 58.