COUNCIL DECISION authorising Germany to apply a reduced rate of electricity tax to electricity directly provided to vessels at berth in a port (&quot;shore-side electricity&quot;) in accordance with Article 19 of Directive 2003/96/EC Proposal for a COUNCIL DECISION authorising Germany to apply a reduced rate of electricity tax to electricity directly provided to vessels at berth in a port (&quot;shore-side electricity&quot;) in accordance with Article 19 of Directive 2003/96/EC
Date: 2011-05-27
Institutions: European Commission
Subjects: Germany, electrical energy, free competition, harbour installation, pollution control measures, tax exemption, tax on consumption, vessel

EUROPEAN COMMISSION 

Brussels, 27.5.2011 
COM(2011) 302 final 

2011/0133 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Germany to apply a reduced rate of electricity tax to electricity directly 
provided to vessels at berth in a port ("shore-side electricity") in accordance with 
Article 19 of Directive 2003/96/EC 

 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Taxation  of  energy  products  and  electricity  in  the  Union  is  governed  by  Council  Directive 
2003/96/EC1 (hereafter referred to as the “Energy Taxation Directive” or the “Directive”). 

Pursuant to Article 19(1) of the Directive, in addition to the provisions foreseen in particular 
in  its  Articles  5,  15  and  17,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to introduce further exemptions or reductions 
in the level of taxation for specific policy considerations. 

The objective of this proposal is to allow Germany to apply a reduced rate of electricity tax to 
electricity  directly  provided  to  vessels  at  berth  in  a  port  (hereafter  referred  to  as  shore-side 
electricity). This exemption is meant to give an economic incentive to the use of shore-side 
electricity in order to reduce air pollution in port cities. 

The request and its general context 

By  letter  dated  27  December  2010,  the  German  authorities  informed  the  Commission  that 
they intended to apply a reduced rate at the level of the EU minimum rate, i.e. 0,50 €/MWh, 
of  electricity  tax  to  shore-side  electricity.  Supplementary  information  was  received  from 
Germany on 11 January 2011. 

Germany has requested for the reduction to be granted for an indeterminate period. 

With  the  requested  measure  Germany  wants  to  give  an  incentive  for  the  use  of  shore-side 
electricity which is considered a less polluting alternative to the generation of electricity on 
board of vessels lying at berth in a port. Currently shore-side electricity has to be taxed at the 
general rate of the electricity tax, which is 20,50 €/MWh. On  the other hand, Member States 
have to exempt electricity generated on board ships for navigation within Community waters 
according to Article 14(1)(c) of the Energy Taxation Directive and may do so in the case of 
electricity produced on board ships for navigation on inland waterways according to Article 
15(1)(f). 

Germany would like to apply a reduced rate of 0,50 €/MWh to shore-side  electricity, thereby 
respecting the minimum rate of taxation for electricity as laid down in Directive 2003/96/EC. 
The reduced rate of electricity taxation is to apply to all supplies of shore-side electricity in 
both Community waters as well as inland waterways, with the exception of private pleasure 
crafts.  

With the tax reduction Germany wants to give an incentive for vessel operators to use shore-
side electricity in order to reduce airborne emissions and noise from vessels at berth as well as 
CO2 emissions. The application of a reduced tax rate would improve the competitive situation 
of  shore-side  electricity  relative  to  the  burning  of  bunker  fuels  on  board,  which  is  fully  tax 
exempt.  

1 

Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for taxation 
of energy products and electricity, OJ L 283 of 31.10.2003 p. 51 

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Germany  considers  that  this  measure  is  in  line  with  Commission  recommendation 
2006/339/EC2 on the promotion of shore-side electricity for use by ships at berth in EU ports 
and with the Commission Communication "Strategic goals and recommendations for the EU's 
maritime transport policy until 2018" (COM(2009)8)3.  

Arguments of the German authorities concerning the impact of the measure on the internal 
market 

The German authorities say that the measure would not affect the proper functioning  of the 
internal  market  and  would  not  lead  to  a  distortion  of  competition.  They  argue  that  the 
beneficiaries,  ship  operators  which  will  receive  shore-side  electricity  taxed  at  the  minimum 
level provided for in Directive 2003/96/EC, will not actually receive an economic advantage 
because  these  operators  currently  generate  their  own  electricity  on  board  and  because  this 
electricity  is  exempted  from  taxation.  According  to  the  German  authorities  substitution  of 
own  generation  on  board  by  shore-side  electricity  taxed  at  the  applicable  minimum  level 
would not lead to an overall cost advantage. 

Existing provisions in the area of the proposal 

Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community  framework 
for the taxation of energy products and electricity, in particular Articles 14(1)(c) and 15(1)(f). 

Assessment of the measure under Article 19 of Directive 2003/96/EC 

Specific policy considerations 

Article 19(1), first subparagraph, of the Directive reads as follows:  

"In addition to the provisions set out in the previous Articles, in particular in Articles 
5, 15 and 17, the Council, acting unanimously on a proposal from the Commission, 
may  authorise  any  Member  State  to  introduce  further  exemptions  or  reductions  for 
specific policy considerations." 

By  means  of  the  tax  reduction  in  question  the  German  authorities  pursue  the  objective  to 
promote an environmentally less harmful way for ships to satisfy their electricity needs while 
lying at berth in ports and thereby to improve local air quality. As Germany has pointed out, 
the  Commission  has  in  fact  already  recommended  the  use  of  shore-side  electricity  as  an 
alternative to the generation of electricity on board the vessels at berth and thereby recognised 
its  environmental  advantages4.  It  is  noted  that  electricity  supplied  to  vessels  at  berth  is 
currently taxed at 20,50 €/MWh 
in Germany. The requested reduction would thus lead to an 
additional incentive for the use of this technology equal to 20 €/ MWh and therefore contribute 
to the stated policy objective.  

The Commission also notes that an important obstacle to a more widespread use of shore-side 
electricity is currently the almost total absence of the necessary onshore infrastructure in ports 

2 

3 

4 

Commission Recommendation 2006/339/EC of 8 May 2006 on the promotion of shore-side electricity 
for us by ships at berth in Community ports (OJ L 125, 12.5.2006). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  –  Strategic  goals  and 
recommendations for the EU's maritime transport policy until 2018, COM (2009) 8 final. 
Cf. note 2 above. 

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and  that  therefore  additional  initiatives  addressing  in  particular  the  built-up  of  this 
infrastructure are likely to be necessary to achieve the policy objective of the tax exemption in 
question.  In  this  regard,  it  is  noted  that  from  June  2011  on,  Member  States  will  have  an 
unconditional  obligation  to  meet air quality standards for relevant pollutants like particulate 
matter5. This obligation requires them to find solutions to problems such as ship emissions at 
berth in ports where this is relevant and it is conceivable that in ports with these problems the 
use of shore-side electricity will be encouraged as one part of the overall air quality strategy. 

As regards the nature of the policy objective pursued the Commission would point out that the 
promotion  of  shore-side  electricity  is  in  fact  a  common  policy  objective  that  should  be 
pursued  by  the  Union  as  a  whole.  This  is  stated  clearly  in  the  Commission  Communication 
COM(2007)575  on  an  integrated  maritime  policy  and  the  accompanying  Commission  staff 
working  paper6,  which  announce  that  this  objective  will  be  taken  up  in  the  context  of  a 
revision of Directive 2003/96/EC. However, the purpose of Article 19 is to react to specific 
circumstances  in  individual  Member  States  that  are  not  reflected  in  the  Directive  itself.  A 
derogation on the basis of Article 19 which pursues the policy objective of promoting shore-
side  electricity  can  therefore  only  be  granted  as  a  transitional  measure  before  this  objective 
has been addressed in the context of a revision of Directive 2003/96/EC. 

Consistency with the other policies and objectives of the Union 

The requested measure concerns mainly the EU's environmental policy. To the extent that it 
will help to reduce the burning of bunker fuels on board the vessels in ports the measure will 
in fact contribute to the objective of improving local air quality. The measure might also, to a 
limited extent, lead to a reduction of CO2 emissions, although the significance of this effect 
will depend on the source of the electricity to be provided to the vessels via the onshore grid7.  

It has to be recalled at this point that one important reason for the unfavourable competitive 
position of shore-side electricity lies in the fact that the alternative, i.e. electricity produced on 
board the vessels while in maritime ports, currently enjoys a full net tax exemption: not only 
is  the  bunker  fuel  burnt  for  generating  the  electricity  exempt  from  taxation,  which 
corresponds to the normal position under Article 14(1)(a) of Directive 2003/96/EC, but also 
the electricity produced on board the vessels is itself exempt (cf. Article 14(1)(c) of Directive 
2003/96/EC). Although the latter exemption could as such be considered difficult to reconcile 
with the environmental objectives of the Union, it mirrors considerations of practicability. In 
fact,  taxation  of  the  electricity  produced  on  board  would  require  a  declaration  by  the  ship 
owner  -  often  established  in  a  third  country  -  or  operator  of  the  amount  of  electricity 
consumed. The declaration would  furthermore have to determine the share of the electricity 
consumed in the territorial waters of the Member State where the tax is due. It would create a 

5 

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7 

Cf. Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient 
air quality and cleaner air for Europe (OJ L 152 of 11.6.2008). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions – An Integrated Maritime Policy 
for the European Union of 10.10.2007, COM (2007) 575 final and Commission staff working document 
– Accompanying document to the Communication from the Commission to the European Parliament, 
the  Council,  the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions  –  An 
Integrated Maritime Policy for the European Union of 10.10.2007, SEC (2007) 1278. 
At an earlier occasion, the Commission has estimated that switching to shore-side electricity will lead to 
an average reduction in CO2 emissions of 50%, cf. footnote 2. However, the impact of the measure in 
question may differ considerably from this average value as it depends crucially on the carbon intensity 
of the relevant market area and the exact time when the additional electricity demand will occur. 

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huge  administrative  burden  for  ship-owners  to  have  to  make  such  declarations  for  every 
Member  States  whose  territorial  waters  are  concerned.  Under  these  circumstances  it  can  be 
justified  not  to  penalize  the  less-polluting  alternative  of  shore-side  electricity  by  allowing 
Germany to apply a reduced rate of taxation. 

As  regards  electricity  consumed  by  vessels  at  berth  in  ports  along  inland  waterways,  and 
contrary to the situation obtaining in maritime ports, exemption of the electricity produced on 
board  is  merely  optional  for  Member  States  (Article  15(1)(f)).  Therefore,  no  legal  obstacle 
would  prevent  Member  States  from  treating  equally  shore-side  electricity  and  on-board 
generation in ports along inland waterways. However, the option offered by Article 15(1)(f) 
of  the  Directive  not  to  tax  electricity  generated  on  board  is  again  to  be  explained  by 
considerations of practicability on the part of the legislator and at the same time closely linked 
to  the  optional  tax  advantages  for  the  purposes  of  navigation  on  inland  waterways.  The 
majority  of  Member  States,  among  which  Germany,  have  decided  not  to  tax  fuels  used  for 
these  purposes.  As  far  as  the  Rhine  and  its  tributaries  are  concerned,  this  tax  exemption  is 
furthermore enshrined in an international agreement8, which Germany has ratified. It is also 
considered impractical to tax separately the input fuel used for the generation of electricity on 
board  [cf.  Article  21(5),  third  subparagraph,  of  Directive  2003/96/EC]  because  this  would 
presuppose,  at  the  very  least,  a  distinction  between  the  fuel  used  for  the  generation  of 
electricity  and  for  navigation.  Finally,  in  deciding  whether  to  extend  the  tax  exemption 
applicable  to  maritime  shipping  to  fuels  used  for  navigation  on  inland  waterways,  Member 
States will take into consideration a number of aspects, including wider objectives of national 
transport policy such as environmental considerations, which may lead them not to tax fuels 
used for these purposes.  

It  is  therefore  considered  justified,  at  the  present  stage,  to  extend  the  possibility  to  exempt 
shore-side electricity to ports in inland waterways. 

Internal market and fair competition 

From  the  point  of  view  of  the  internal  market  and  fair  competition  the  measure  requested 
would reduce the existing distortion between two competing sources of electricity for boats at 
berth,  i.e.  on  board  generation  and  shore-side  electricity,  caused  by  the  tax  exemption  for 
bunker fuels.  

As  regards  competition  between  vessel  operators,  it  first  has  to  be  reiterated  that  there  are 
currently  very  few  vessels  which  use  shore-side  electricity  on  a  commercial  basis.  Second, 
even if the measure will provide shipping companies with an advantage in the sense that they 
will be able to purchase electricity at lower costs compared to companies operating in other 
sectors, the examined measure is not expected to alter significantly the competitive situation 
within  the  shipping  sector.  Although  precise  cost  projections  depend  crucially  on  the 
development  of  the  oil  price  and  are  therefore  very  difficult,  the  available  evidence  would 
confirm the statement made by Germany that overall even a full tax exemption would in most 
cases  not  reduce  operational  costs  of  shore-side  electricity  below  the  costs  of  on-board 
generation9 and would therefore not, in any event, represent a significant competitive benefit 

8

9 

Cf. article 1 of the Agreement of 16 May 1952 between the Rhine riparian States and Belgium on the 
customs  and  fiscal  treatment  of  gasoil  used  as  a  ship's  supply  in  the  navigation  of  the  Rhine 
(Bundesgesetzblatt 1953, part II, p. 531).  
Cf.  European  Commission  Directorate  General  Environment,  Service  Contract  Ship  Emissions: 
Assignment, Abatement and Market-based Instruments, Task 2a – Shore-Side Electricity, August 2005, 

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on vessel operators using shore-side electricity as opposed to those using on-board generation. 
In  the  present  case,  a  significant  distortion  of  the  above  mentioned  kind  can  all  the  less  be 
expected since Germany will respect the minimum level of taxation prescribed by Directive 
2003/96/EC.  

Concerning competition between ports, in a situation where, as stated above, the use of shore-
side electricity is, at least in the short term, unlikely to become more economic than on-board 
generation  in  spite  of  the  tax  reduction,  this  tax  reduction  for  shore-side  electricity  is  also 
unlikely to significantly distort competition between ports by inducing vessels to change their 
itinerary according to the availability of this option. 

Finally,  it  can  be  added  that  the  timeframe  for  which  it  is  proposed  to  authorize  the 
application  of  a  reduced  tax  rate  is  sufficiently  short  to  make  it  unlikely  that  the  analysis 
conducted in the two preceding paragraphs will change before the date of expiry.  

Period  of  application  of  the  measure  and  development  of  the  EU  framework  on  Energy 
Taxation 

In principle, the period of application of the derogation should be long enough in order not to 
discourage  port  operators  from  making  the  necessary  investments.  This  objective  has  to  be 
reconciled, though, with the need to review the position obtaining in Germany in due time and 
the need not to undermine future developments of the existing legal framework. In the latter 
regard, it should be borne in mind that the Commission has proposed a revision of Directive 
2003/96/EC  on  13  April  201110  with  a  view  to  bringing  it  more  closely  in  line  with  the 
objectives of energy and environment policies and in particular the climate change objectives 
for the period after 2013. This proposal also contains a provision requiring Member States to 
exempt shore-side electricity from taxation until 31 December 2020 (draft Article 14(1)(e)). 
Under  these  circumstances,  it  appears  appropriate  to  grant  the  authorisation  requested  for  a 
period of three years, subject however to the entry into application of general provisions in the 
matter, at a point in time earlier than the expiry thus foreseen. 

State aid rules 

The tax rate of 0,50 €/MWh envi saged by the German authorities respects the minimum level 
of taxation pursuant to Article 10 of Directive 2003/96/EC. The measure therefore falls under 
the so-called General Block Exemption Regulation (Regulation (EC) No 800/2008)11 and is, 
by consequence, exempt from the prior notification requirement. 

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11 

http://ec.europa.eu/environment/air/pdf/task2_shoreside.pdf.  The  cost  analysis  is  carried  out  for  the 
three ports of Gothenburg (Sweden), Juneau and Long Beach (USA). 
Proposal  for  a  Council  Directive  amending  Directive  2003/96/EC  restructuring  the  Community 
framework for the taxation of energy products and electricity, COM (2011) 169/3. 
Commission  Regulation  (EC)  No  800/2008  of  6  August  2008  declaring  certain  categories  of  aid 
compatible with the common market in application of Articles 87 and 88 of the Treaty (General block 
exemption Regulation), OJ L 214, 9.8.2008. 

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2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

This proposal is based on a request made by Germany and concerns only this Member State.  

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The proposal aims at authorising Germany to derogate from the general provisions of Council 
Directive 2003/96/EC and to apply a reduced rate of 0,50 €/MWh electricity tax to electricity 
directly provided to vessels at berth in a port.  

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

Subsidiarity principle 

The field of indirect taxation covered by Article 113 TFEU is not in itself within the exclusive 
competence of the European Union within the meaning of Article 3 TFEU. 

However,  the  exercise  by  Member  States  of  their  competences  in  this  field  is  strictly 
circumscribed  and  limited  by  existing  EU  law.  Pursuant  to  Article  19  of  Directive 
2003/96/EC, only the Council is empowered to authorise a Member State to introduce further 
exemptions  or  reductions  within  the  meaning  of  that  provision.  Member  States  cannot 
substitute themselves for the Council.  

The proposal therefore respects the principle of subsidiarity.  

Proportionality principle 

The proposal respects the principle of proportionality. The tax reduction does not exceed what 
is necessary to attain the objective in question (cf. the considerations on the Internal market 
and fair competition aspects, above). 

Choice of instruments 

Instrument(s) proposed: Council Decision. 

Article 19 of Directive 2003/96 makes provision for this type of measure only. 

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4. 

BUDGETARY IMPLICATION 

The  measure  does  not  impose  any  financial  or  administrative  burden  on  the  Union.  The 
proposal therefore has no impact on the budget of the Union.  

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2011/0133 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Germany to apply a reduced rate of electricity tax to electricity directly 
provided to vessels at berth in a port ("shore-side electricity") in accordance with 
Article 19 of Directive 2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity12, and in particular 
Article 19 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

By letter of 27 December 2010, Germany sought the authorisation to apply a reduced 
rate  of  electricity  tax  to  electricity  directly  provided  to  vessels  at  berth  in  a  port 
(“shore-side electricity”) pursuant to Article 19 of Directive 2003/96/EC.  

(2)  With  the  tax  reduction  it  intends  to  apply,  Germany  aims  at  promoting  a  more 
widespread  use  of  shore-side  electricity  as  an  environmentally  less  harmful  way  for 
ships to satisfy their electricity needs while lying at berth in ports as compared to the 
burning of bunker fuels on board the vessels.  

(3) 

(4) 

In  so  far  as  the  use  of  shore-side  electricity  avoids  emissions  of  air  pollutants 
associated with the burning of bunker fuels on board the vessels at berth, it contributes 
to an improvement of local air quality in port cities. The measure is therefore expected 
to contribute to the EU's environmental and health policy objectives. 

Allowing  Germany  to  apply  a  reduced  rate  of  electricity  taxation  to  shore-side 
electricity  does  not  go  beyond  what  is  necessary  to  achieve  the  above  mentioned 
objective,  since  on-board  generation  will  remain  the  more  competitive  alternative  in 
most cases. For the same reason, and because of the current relatively low degree of 
market  penetration  of  the  technology,  the  measure  is  unlikely  to  lead  to  significant 
distortions  in  competition  during  its  lifetime  and  will  thus  not  negatively  affect  the 
proper functioning of the internal market. 

12 

OJ L 283, 31.10.2003, p. 51. 

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(5) 

It follows from Article 19(2) of Directive 2003/96/EC that each authorisation granted 
under that provision must be strictly limited in time. Given the need for a period long 
enough  in  order  not  to  discourage  port  operators  from  making  the  necessary 
investments, but also the need to review the position obtaining in Germany in due time 
and the need not to undermine future developments of the existing legal framework, it 
is appropriate to grant the authorisation requested for a period of three years, subject 
however to the entry into application of general provisions in the matter, at a point in 
time earlier than the expiry thus foreseen,  

HAS ADOPTED THIS DECISION:  

Article 1 

Germany  is  hereby  authorised  to  apply  a  reduced  rate  of  electricity  taxation  to  electricity 
directly  supplied  to  vessels  berthed  in  ports,  other  than  private  pleasure  craft,  provided  that 
the minimum levels of taxation pursuant to Article 10 of Directive 2003/96/EC are respected. 

Article 2 

This Decision shall apply from the 20th day following its publication in the Official Journal of 
the European Union. It shall cease to apply three years thereafter.  

However, should  the  Council, acting on the basis of Article 113 TFEU,  provide  for  general 
rules on tax advantages for shore-side electricity, this Decision shall cease to apply on the day 
on which those general rules become applicable.  

Article 3 

This Decision is addressed to the Federal Republic of Germany. 

Done at Brussels, 

For the Council 
The President 

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