2006/640/EC: Commission Decision of 23 November 2005 on the State Aid schemes implemented by Slovenia in the framework of its legislation on Carbon Dioxide Emission Tax (notified under document number C(2005) 4435)   (Text with EEA relevance)
Date: 2005-11-23
Institutions: European Commission
Subjects: Slovenia, State aid, air quality, control of State aid, environmental tax, greenhouse gas, tax relief

27.9.2006

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Official Journal of the European Union

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COMMISSION DECISION

of 23 November 2005

on the State Aid schemes implemented by Slovenia in the framework of its legislation on Carbon
Dioxide Emission Tax

(notified under document number C(2005) 4435)

(Only the Slovene version is authentic)

(Text with EEA relevance)

(2006/640/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity, and in particular the first subparagraph of Article 88(2)
thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provision(s) cited above (1),

Whereas:

PROCEDURE

(1) On 18 October 2002, the Slovene authorities informed the
Commission about the existence of a State aid scheme
whereby certain categories of companies benefit from a tax
reduction under the national CO2 emission tax. The scheme
was registered at the Commission as case SI 1/2003. The
scheme had previously been approved by the national State
aid authority of Slovenia in conformity with Annex IV,
Chapter 3, paragraph 2 of the Treaty of Accession of the
Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hun-
gary, Malta, Poland, Slovenia and Slovakia to the European
Union (2)
the
Community Guidelines on State aid for environmental
protection (Environmental guidelines) (3).

(Treaty of Accession), on the basis of

(2) Due to the lack of complete information concerning the
measure,
further
the Commission asked Slovenia for
clarification and the scheme could not be included in the
existing aid list under the Appendix to the Annex IV of the
Treaty of Accession.

(3)

Further information was submitted to the Commission by
the Slovene authorities on 7 November 2002, 1 April
2003, 16 May 2003, 1 October 2003, 4 February 2004,
1 June 2004, 17 September 2004 and 28 September 2004.
Two meetings took place between the Slovene authorities
and the Commission on 24 November 2003 and 8 March
2004.

(4) Meanwhile, major changes took place in the EU legislation
that had a significant impact on the Slovene CO2 tax
system:

— the Council Directive 2003/96 of 27 October 2003
on the taxation of energy products and electricity (4)
(‘Energy Taxation Directive’),

— the Directive 2003/87/EC of the European Parliament
and Council of 13 October 2003 establishing a
scheme for greenhouse gas emission allowances
trading within the Community and amending Council
Directive 96/61/EC (5) (‘Directive on emission trad-
ing’), and

— the Directive 2004/8/EC of the European Parliament
and Council of 11 February 2004 on the promotion
of cogeneration (6)

have entered into force on their
publication.

respective days of

(5) Consequently, the Slovene authorities decided to modify
their tax scheme, and notified the new — at that time draft
— legislation to the Commission. The Commission
registered the new scheme in June 2004, under the number
N 402/2004.

(6)

Based on the information at its disposal, the Commission
had doubts as to the compatibility of certain parts of both
measures SI 1/2003 and N 402/2004 with the common
market. Thus, on 14 December 2004, it initiated a formal
investigation procedure on the basis of articles 4.4 and 6 of
Council Regulation (EC) No 659/1999 on the rules for the
application of article 93 of the EC Treaty (7) and requested
the Slovene authorities to submit their comments (the

(1) OJ C 46, 22.2.2005, p. 3.
(2) OJ L 236, 23.9.2003.
(3) OJ C 37, 3.2.2001, p. 3.

(4) OJ L 283, 31.10.2003, p. 51.
(5) OJ L 275, 25.10.2003, p. 32.
(6) OJ L 52, 21.2.2004, p. 50.
(7) OJ L 83, 27.3.1999, p. 1.

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that
‘Opening Decision’). A meaningful
Opening Decision was published on 22 February 2005 in
the Official Journal of the European Union (8). All interested
parties were invited to submit their comments within one
month of the date of publication.

summary of

(7) After the opening of the formal investigation procedure,
the Commission registered the case number C 47/2004 for
case SI 1/2003 and the case number C 44/2004 for case
N 402/2004.

(8)

By letter dated 18 January 2005, registered on 20 January
2005, the Slovene authorities submitted their comments
with regard to the doubts raised by the Commission in its
Opening Decision. On 4 April and 7 July 2005,
the
Commission sent
to the Slovene
further questions
authorities, which were answered respectively by letters
dated 17 May and 8 August 2005.

(9)

The Commission did not receive any comments from third
parties.

(10) For an easier understanding of the amendments introduced
by the new legislation, the Opening Decision covered both
the old system of tax reductions (case SI 1/2003) and the
new scheme (case N 402/2004). For reasons of clarity and
coherence, the present decision also covers both cases
C 44/2004 and C 47/2004.

A)

SCHEME C 47/2004 (EX CASE SI 1/2003)

1.

DESCRIPTION OF THE SCHEME

(11) The scheme is based on the ‘Regulation on tax for air pollution
with CO2 emissions’ of 17 October 2002, and entered into
force in Slovenia in October 2002 (the ‘Regulation’). The
new, modified legislation (scheme C 44/2004) entered into
force on 1 May 2005, and replaced the Regulation.

(12) Therefore, by the present decision the Commission assesses
the compatibility of
the Regulation with the common
market, covering the period of time between 1 May 2004
(date of accession of Slovenia to the EU) and 1 May 2005
(end of application of the Regulation).

(13) The Regulation foresaw a tax levied on the basis of the
quantity of CO2 emitted by each installation. It contained
three categories of tax reductions that were submitted to
the Commission for approval as operating aid measures
under the Environmental guidelines:

(i)

Companies that produce electricity in combined heat
and power (CHP) installations could be granted a tax
reduction if they had an at least 5 % energy saving for
existing installations, or 10 % for new installations.

(8) OJ C 46, 22.2.2005.

In its Opening Decision, the Commission found this
aid compatible with article 87(3)(c) of the EC Treaty.

(ii)

The second category of tax reductions concerned all
installations that were operating in Slovenia before
1998, had an average of at least 10t CO2 emissions per
year during the period 1986 to 1998, and have asked
for
from the Ministry of
Environment before 2002. Special reduction rates
were foreseen for the following categories of bene-
ficiaries:

an emission permit

— installations producing heat isolation materials,

— power plants feeding electricity to a high voltage

transmission network,

— installations of transport of natural gas in gas

networks,

— district heating installations, for CO2 emissions

due to the use of fossil fuels.

In its Opening Decision, the Commission found that
the tax reduction for power plants feeding electricity
to a high voltage transmission network (second indent
above), did not constitute State aid in the meaning of
article 87(1) of the EC Treaty.

It initiated a formal investigation procedure concern-
ing all other tax reductions under this category, on the
basis of articles 4.4 and 6 of Council Regulation (EC)
No 659/1999 on the rules for the application of
article 93 of the EC Treaty.

(iii) The third category of tax reductions concerned large
combustion plants of power
stations delivering
electricity to a high voltage transmission network,
using domestic coal as fuel.

In its Opening Decision, the Commission came to the
conclusion that this measure did not constitute State
aid in the meaning of article 87(1) of the EC Treaty.

(14) The investigation procedure of the Commission therefore
concentrated on the State aid measures under point (ii)
above.

2.

DE MINIMIS AID

(15) At

the date of

the Commission's Opening Decision
(14 December 2004), the Regulation was still applicable.
However, in their letter dated 17 May 2005, the Slovene
authorities confirmed that no administrative decision on
CO2 tax reduction had been taken on the basis of the
Regulation as of the date of reception of the Commission's

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decision by the Slovene authorities (22 December 2004).
On 1 May 2005, the new legislation entered into force and
replaced the Regulation.

(16) To the Commission's request (letter dated 4 April 2005),
the Slovene authorities provided it with a list of all the
beneficiaries that had received tax reduction under the
Regulation after the date of accession of Slovenia to the EU,
as well as the corresponding amounts of tax reduction,
until the end of applicability of the Regulation (letter dated
17 May 2005).

(22) As a result of this short application period, the aid granted
under
than the threshold of
lower
EUR 100 000 per beneficiary fixed by article 2 of the
Commission Regulation on de minimis aid.

scheme is

this

(23) By their letters of 17 May 2005 and 8 August 2005, the
Slovene authorities also undertook to respect all other
conditions of the Commission Regulation on de minimis aid,
and described the monitoring system that ensures the
correct application of those rules.

(17) According to this information, the overall amount of the
tax reduction between 1 May 2004 and 1 May 2005 was
998 771 euros, granted to 153 companies in total. None of
the companies have received more than EUR 100 000. In
fact, only two companies received more than 27 000 euros,
but none of them more than EUR 100 000.

4.

CONCLUSION

(24) The Commission therefore concludes that

the measure
fulfils the criteria of the Commission Regulation on de
minimis aid and, in line with its article 2.1, is deemed not to
constitute State aid in the meaning of article 87(1) of the EC
Treaty.

(18) The Slovene

argue

therefore

authorities

a
consequence of the very short period of application of
the Regulation after the accession of Slovenia to the EU, the
amount of aid granted under this scheme is lower than the
threshold of EUR 100 000 fixed by article 2 of
the
Commission Regulation on de minimis aid (9).

that,

as

(19)

In their letter dated 8 August 2005, the Slovene authorities
describe in details the system put in place to monitor de
minimis aid in Slovenia. According to this information,
Slovenia has
set up a system for monitoring and
supervising the granting of aid under the de minimis rule
by establishing a central register of de minimis aid, in the
the Ministry of
State Aid Monitoring Department of
Finance. Before the granting of any de minimis aid by any
authority, this department must check that the conditions
of
the Commission Regulation on de minimis aid are
respected. The central register was established before the
accession of Slovenia to the EU.

B)

SCHEME C 44/2004 (EX N 402/2004): MODIFICATION

OF THE SCHEME C47/2004

1.

DESCRIPTION OF THE SCHEME

(25)

In their letter of information registered on 1 June 2004, the
Slovene authorities
informed the Commission about
significant modifications in the Slovene legislation, leading
inter alia, the amendment of the Regulation on CO2
to,
taxation in force since 2002. The new set of national acts
consists of the new Environmental protection act (10), the
act amending the Law on Excise Duties (11) and a
governmental decree on the taxation of CO2 emissions
(the ‘Decree’), entered into force on 1 May 2005.

(26) The Decree keeps the logic of the previous system of CO2
taxation unchanged: the tax is based on the quantity of CO2
emitted by the installations.

(20) The Slovene authorities confirmed in their letter dated
8 August 2005 that, due to the use of this centralized
system, the beneficiaries of the measure could not receive
any aid that would exceed EUR 100 000 per beneficiary
over a period of three years.

(27)

It contains three measures of
tax reduction that were
submitted to the Commission for approval under the
Environmental guidelines. All the three measures have a
duration of 5 years: from 1 January 2005 till 31 December
2009.

3.

ASSESSMENT

(21) On the date of reception of the Commission's Opening
the Slovene authorities
Decision (22 December 2004),
immediately put an end to the application of
the tax
reduction scheme at stake. A significantly modified new
scheme entered into force a few months later, on 1 May
2005. Thus, the Regulation assessed by the present decision
was applicable in Slovenia for a period of one year after
accession, but it was de facto applied for a period of less
then 8 months (from 1 May 2004 to 22 December 2004).

(i)

Companies that produce electricity in combined heat
and power (CHP) installations can be granted a tax
reduction if they achieve certain energy savings.

In its Opening Decision, the Commission found this
measure compatible with article 87(3)(c) of the EC
Treaty. Although the measure was only a draft Decree
at the time of that decision, the Slovene authorities
confirmed by their letter dated 17 May 2005 that this
measure had not been modified.

(9) Commission Regulation No 69/2001 of 12 January 2001 on the
application of articles 87 and 88 of the EC Treaty to de minimis aid

(10) Ur.I.RS 41/2004.
(11) Ur.I.RS 42/2004.

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(ii)

The second category of reductions concerns power
plants feeding electricity to a high voltage transmis-
sion network, and certain large combustion installa-
tions listed under article 23 of the Decree.

As far as the power plants are concerned,
the
Commission concluded in its Opening Decision that
this measure did not constitute State aid. Concerning
the large combustion installations, the Commission
found their tax reduction compatible with the EC
Treaty.

(iii) According to the draft Decree as submitted to the
Commission before its Opening Decision, all oper-
ators that feed electricity to a high voltage transmis-
sion network but are neither
energy intensive
businesses nor covered by a voluntary environmental
agreement or a tradable permit scheme, could benefit
from 43 % tax reduction in 2005 decreasing by 8
percentage points each year. District heating installa-
tions in the same situation could benefit from a 26 %
reduction in 2005 decreasing by 8 percentage points
each year.

In its Opening Decision,
the Commission raised
doubts as to the compatibility of this measure with
the common market and, based on articles 4.4 and 6
of Council Regulation (EC) No 659/1999 on the rules
for the application of article 93 of the EC Treaty, it
initiated a formal investigation procedure. This was
the only category of tax reduction in the new draft
Decree that was subject to the Commission's State aid
investigation procedure.

(28) Following the Commission's Opening Decision, the Slovene
authorities modified the draft Decree. The final version of
the Decree, as entered into force in May 2005, replaces this
category of tax reduction by the following categories:

(29) Under article 18, 3rd indent of the Decree, companies that
participate in the EU emission trading scheme, in line with
the Directive on emission trading, and are not energy
intensive, can benefit
from a tax reduction from the
national CO2 tax.

(30) Under article 18, 4th indent, companies that enter into
voluntary environmental agreements, can also benefit from
tax reduction.

(31) The tax reduction rate is decreasing by 8 percentage points

each year:

— 2005: 43 %,

— 2006: 35 %,

— 2007: 27 %,

— 2008: 19 %, and

The last year of tax reduction is 2009: no reduction applies
as of 2010.

(32) District heating installations benefit from a 26 % reduction
in 2005, decreasing by 8 percentage points each year.

2.

ASSESSMENT

(33) The Slovene authorities notified the aid measure to the

Commission before implementing it.

(34) The measure that is subject to the Commission's investiga-
tion procedure is mainly based on articles 18, 3rd and 4th
indent; and articles 22 to 24 of the Decree. Although the
Decree entered into force during the investigation proced-
ure of the Commission, the Slovene authorities confirm in
their letter dated 17 May 2005 that articles 18, 4th indent;
23 and 24 will become applicable only after
the
Commission's final approval. They therefore comply with
their obligation on the basis of article 88(3) of the EC
Treaty and article 3 of the Council Regulation (EC) no 659/
1999 on the rules for the application of article 93 of the EC
Treaty, as far as these articles are concerned.

(35) However,

the tax reimbursement measures under

the
Commission's investigation procedure can also be based
on articles 18, 3rd indent and article 22 of the Decree. The
Slovene authorities consider (12) that these articles were
brought in line with the EC Treaty after the Commission's
Opening Decision, and they therefore did not suspend their
entering into force until the Commission's final approval.
These articles are thus in force since 1 May 2005, in breach
of article 3 of the Council Regulation (EC) no 659/1999 on
the rules for the application of article 93 of the EC Treaty.

2.1 Existence of aid within the meaning of article 87(1)

of the EC Treaty

(36) The Commission is of

the view that the amendments
introduced by the Slovene authorities in the tax reduction
measure since the Opening Decision, do not in any way
change the assessment in the Opening Decision concerning
the existence of aid within the meaning of article 87(1) of
the EC Treaty. Consequently, the Commission considers
that the measures under assessment constitute State aid
within the meaning of article 87(1) of the EC Treaty.

2.2 Compatibility of the aid with the EC Treaty

(37) The Commission notes that the Slovene authorities have
structured the scheme on the basis of the Environmental
guidelines and the Energy Taxation Directive.

Compatibility with the Environmental guidelines

(38) The Commission assesses the compatibility of the measures
in particular with articles 51.2 and 51.1 (b) 1st indent of the
Environmental guidelines. The Slovene CO2 taxation system
has been introduced in October 2002. Therefore, according

— 2009: 11 % of tax reduction.

(12) See the Slovene authorities’ letter dated 17 May 2005.

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to article 51.2, the provisions of article 51.1 can only apply
if the following two conditions are satisfied at the same
time:

(a)

(b)

the tax has an appreciable positive impact in terms of
environmental protection. The logic of the Slovene tax
system is to tax companies with a higher rate of CO2
emissions more than companies that emit less CO2.
Such a taxation system leads inherently to an incentive
for the companies to act in a more environmentally
friendly manner, by emitting less CO2. Therefore, the
Commission considers that
this first criterion of
article 51.2 is fulfilled.

the derogation for the beneficiaries must have been
decided on when the tax was adopted. The categories
of beneficiaries foreseen by the initial act of 2002 on
CO2 taxation are much larger than the categories
covered by the Decree under
assessment. The
modifications introduced are due to the accession of
Slovenia to the EU and the subsequent changes in the
applicable legislation. The Commission considers that
these modifications left the nature and logic of the
derogations unchanged. They only reduce the circle of
the beneficiaries in line with the applicable EU
legislation.

(44) With regard to the different levels of taxation applicable in
Slovenia for different input fuels, the tax rate to be paid by
an installation will depend on the nature of the input it will
use for its operation. The Commission therefore cannot
verify and make sure a priori that the minimum levels of
taxation fixed by the Energy Taxation Directive will be
respected for each installation. In their letter dated 17 May
2005, the Slovene authorities repeated their commitment
to ensure for both categories of beneficiaries that the tax
they pay after reduction will remain higher than the
Community minimum, defined by the Energy Taxation
Directive. The tax reductions are granted in the form of tax
reimbursements,
the competent national authority can
therefore verify compliance with the minimum harmonised
level for each installation, before executing the reimburse-
ment.

(45) The Commission also takes into consideration the decreas-
ing nature of the tax reductions, leading to significantly
lower reductions each year.

(46) On the basis of the above undertaking by the Slovene
authorities, the Commission considers that the condition of
article 51.1(b)1st
indent, whereby the amount effectively
paid by the beneficiaries after the reduction has to remain
higher than the Community minimum, is fulfilled.

(39) The Commission therefore concludes that

this second
condition of article 51.2 of the Environmental guidelines is
also fulfilled.

(47) The conditions of article 51.1(b)1st indent of the Guidelines
on environmental protection are therefore satisfied for both
categories of beneficiaries.

(40) As a consequence of

in accordance with
article 51.2 of the Environmental guidelines, the provisions
of point 51.1 may apply to the measures under assessment.

the above,

(41) According to article 51.1(b)1st

indent, where the tax
reduction concerns a Community tax, a maximum 10 year
exemption period can be authorised by the Commission if
the amount effectively paid by the beneficiaries after the
reduction remains higher than the Community minimum.

(42) Since 1 January 2004,

the Energy Taxation Directive
foresees a harmonised energy taxation in the Member
States. The Commission considers, in line with article 4 of
that Directive, that the Slovene tax system based on the
quantity of CO2 emitted by the companies, taxes energy
products as defined under article 2 of the Energy Taxation
Directive and therefore falls within the scope of
that
the Slovene tax system concerns a
Directive. Hence,
Community tax, in the meaning of article 51.1(b) 1st indent.

Compatibility with the Energy Taxation Directive

(48) The Energy Taxation Directive requires in its article 17.1
that even if the minimum levels of taxation prescribed in
that Directive are respected, Member States can only apply
tax reductions
in favour of energy-intensive
businesses or if the beneficiary has entered into special
agreements with environmental protection objectives or is
covered by a tradable permit scheme.

is

it

if

(49) The beneficiaries covered by article 18, 3rd indent of the
Decree, must participate in the EU emission trading
scheme, in line with the Directive on emission trading (13),
(13), in order to benefit from the reduction.

(50) The beneficiaries covered by article 18, 4th indent of the
Decree, must enter into voluntary environmental agree-
in order to benefit from the tax reduction. The
ments,
environmental target to be achieved by the beneficiaries
under the environmental agreements is a reduction of CO2
emissions of 2,5 % by the end of 2008, compared to the
emissions during the reference period (1999 to 2002).

(43) The reduction only applies for a period of less than 5 years
which is less than the maximum foreseen by article 51.1.

(13) See footnote 3.

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(51)

In light of the above, the Commission finds that both
categories of tax reductions are in line with the require-
ments of the Energy Taxation Directive,

HAS ADOPTED THIS DECISION:

Article 2

The present Decision covers the tax reductions granted on the
basis of the Decree, until 31 December 2009.

The present Decision is addressed to the Republic of Slovenia.

Article 3

Article 1

Done at Brussels, 23 November 2005.

The tax reduction measures, as
foreseen by the Slovene
governmental Decree on the taxation of CO2 emissions, entered
into force on 1 May 2005, are compatible with article 87(3)(c) of
the EC Treaty.

For the Commission
Neelie KROES
Member of the Commission