Respons. Introduction. Our reference: NA. Directorate-General for Competition Unit for State aids Energy and Environment.

Transcription

1 Directorate-General for Competition Unit for State aids Energy and Environment Our reference: NA Your reference: HT Consultation on Community Guidelines on State Aid for Environmental Protection Respons HT Consultation on the Community Guidelines on State aid for environmental protection and environmental support measures in the General Block Exemption Regulation Introduction During recent years, there has been a substantial increase in the use of market-based instruments and in particular different kinds of environmentally related taxes in most Member States. When designing policy packages, it is important to regard policies and measures at the EU-level as a whole. There are many political objectives that interact, especially in the area of environmental taxation. Member States may want to be more ambitious in certain policy areas compared to the objectives set up at the EU-level. The Community framework needs to provide a certain amount of flexibility so that national priorities can be fulfilled, in order to provide an opportunity for Member States to examine different ways and tools for reaching set goals. The application of the state aid rules by way of Environmental Guidelines is a crucial aspect in this context. Amongst these objectives at the EU level we find the 2020-strategy, the EU s growth strategy for this decade including objectives in i.a. the climate/energy area. Another starting point is that simplification and reduction of the administrative burden, both for MS and for enterprises, is a key priority for the European Union. There is a need to abstain from obligations for enterprises to present very detailed analysis and information. This does not mean however that the Treaty rules on state aid should not be upheld as far as possible. To maintain a free and fair competition is of great importance to the Union as a whole. State aid should be kept at a reasonably low level, and must not be allowed to rise as a result of the SAM-reform per se. Svenskt Näringsliv Confederation of Swedish Enterprise Postadress/Address: SE Stockholm Besök/Visitors: Storgatan 19 Telefon/Phone: +46 (0) Org. Nr:

2 2 (5) To strike a balance between all these starting points is a very delicate task. Moreover, there is a need to point out that a significant deficiency of the effects of the state aid system as a whole, is that it is limited to the European Union, and also that the WTO rules do not have the same strength. Global competition restricts enterprises ability to pass on cost increases A basis in the new Environmental Aid Guidelines (EAG) should be to reflect the reality in the sense that most enterprises find themselves in a highly competitive situation and are having difficulties in passing on any increased costs to customers on an increasingly global market. A company that is located in a MS with high environmental ambitions, with consequently high taxes and /or other charges, therefore typically cannot pass on the increased cost to customers. The guidelines should mirror this reality. This it also has to be taken into account that the introduction of policies on the EU level might cause increased costs for companies that cannot be passed on to customers when acting on a global market. Environmental taxes are different The EAG and the GBER deal mainly with investment aid. To deal with that type of aid is necessary. However, some MS, especially MS with high taxes, use the method of tax reductions instead. Hence they use operating aid. The structure of an environmentally related tax differs fundamentally from that of other taxes, such as income, capital or corporate taxes and VAT. The tax base is different by nature. Special tax exemptions and reductions made in order to secure an effective fulfillment of particular environmental objectives, which might look odd if applied in other tax systems, can be fully logical from an environmental tax point of view. GBER Article 25 Lowering carbon emissions and improving energy efficiency are two of the Union's overall objectives. Some Member States have in this regard gone further than others and have introduced energy and carbon dioxide taxes to a level that are many times higher than the minimum levels of the Energy Taxation Directive. These national levels thus have a height that would force enterprises exposed to international competition, to change their country of operation (or to have even worse consequences), unless other levels could be applied to them. The provision in the general block exemption regulation (GBER) Article 25 which gives MS the right to vary the tax levels above EU minimum levels is therefore indispensable for those MS who wishes to charge very high energy and carbon dioxide taxes from as many categories of users as possible. Since technical progress moves so fast, also in the area of environmental technology, it is difficult to construct proper functioning guidelines valid for seven years. This is another argument for having as general rules as possible, of the type that Article 25 provides. Article 25 of the GBER deals only with the reduction of harmonized environmental taxes. This means that tax reductions for non-harmonized taxes are assessed under general state aid rules, and the present EAG, which in turn leads to uncertainty. Consequently MS and enterprises need guidance on the concept of state aid and also improvements in Articles 154

3 3 (5) -159 of the EAG. Also for harmonized taxes however, there is a need for guidance on the concept of state aid. The concept of state aid The Commission s notice on the application of the State aid rules to measures relating to direct business taxation does not provide Member States with enough guidance as regards the nature and logic of environmentally related taxes. Unlike direct taxation, the purpose of environmentally related taxes is primarily to deal with environmental problems and give operators an incentive to reduce certain activities that are deemed to be harmful to the environment. The main purpose is thus not to collect revenue. These two objectives are inherent in environmentally related taxes and need to be taken into particular account when assessing if tax exemptions or tax reductions are justified by the special nature and logic of the tax system. A distinction must be made between on the one hand such objectives, which are inherent in the tax systems, and on the other hand external objectives assigned to a particular tax scheme. A common question is whether the necessary exemptions for certain businesses result from the nature and logic of the tax system or not. This issue has been addressed by the Court in a number of decisions and interpretation of these would be valuable, in line with the SAM 2012 Communication p 23. Especially the number of cases on British Aggregates, the latest being C-487/06 P and T-209/02 RENV, has proved that there is a dire need for an interpretation of the concept of nature and logic of the system. In that context a review of the concept of selective advantage (see T.209/02 RENV para 70) would also be helpful as well as a discussion on the topic of a reference framework and the term normal taxation, see e.g. C-88/03, Portugal v Commission para 56. A Commission discussion on the concept of state aid would, as is said above, be very valuable. This is not sufficient however. Additional help must be sought. One way could be to consider all non-harmonized taxes as being outside of the state aid assessment, arguing that if only one country imposes a specific type of environmental tax that others do not have, the possibly exempted company has no advantage over competitors in other countries. Doing so, however, would be to violate the state aid system as a whole. Another solution must be looked for. The present Environmental Aid Guidelines Chapter 4 Articles has worked well and could be kept as they are. Article 151 contains a reference to the concept of indirect incentive effect. This concept is necessary to maintain since it forms a basis for MS ability to have a two-level tax system. The lower tax rate for some enterprises is a prerequisite for the high tax level. The lower tax rate leads to an indirect improvement of the level of environmental protection. The improvement is indirect since it results from tax payers at the higher level. The European Union is leading in the area of environmental taxation. In reality this means that any tax in this field normally is an extra burden on EU businesses vis-à-vis competitors outside of the EU. Articles in the EAG provide for a solution to this. The rules are however too theoretically designed. As mentioned above almost all enterprises find themselves in a highly competitive situation and cannot pass on cost increases to their customers. This should be considered as the norm. Hence, Article 158 c) can be deleted, which in turn would bring down the administrative burden significantly.

4 4 (5) Article 158 b) could also be deleted. If a MS introduces a very low non-harmonized environmental tax, then a further reduction of that tax does not have any effect on competition as a whole. If on the other hand the tax is high, the presumption then naturally must be that the tax leads to a substantial increase in production costs. Also this deletion would significantly reduce administration costs without any adverse effects on the state aid situation. In Article 159 b) there is a requirement for beneficiaries to pay at least 20 % of the national tax. One of the key objectives of the Union is to improve the level of environmental protection. If a reduction for some enterprises is necessary in order to make it at all possible for a MS to adopt higher taxes for other tax payers, thus resulting in an overall improvement of the level of environmental protection, MS should be freer to apply lower levels of a national tax. Therefore the percentage in Article 159 b) should be reduced to 5 or 10 %. Article 154 provides for aid in the form of reductions of or exemptions from environmental taxes to be considered compatible with the internal market within the meaning of Article 107 of the Treaty for a period of 10 years. Article 25.3 of the GBER provides for renewals of a 10 year period. The same possibility should also be clearly expressed in Article 154, since especially in high tax MS the risk for carbon leakage could well be in existence for more than 10 years. These changes might be considered drastic, but we must keep in mind that environmental taxation is a very special field. Other taxes could not be treated this way, e.g. company taxation or social security charges. The state aid system must not be an unnecessary hindrance to the Union 2020-strategy. State aid rules and secondary legislation A general note on EU legislation is also worth mentioning in this regard. If the Union itself has adopted a secondary legislation like directives, MS and its citizens should be able to rely on that legislation being in line with EU primary legislation. This would also be in line with the Court s findings in C/475-01, Commission v Greece, the so-called Ouzo case. Possible conflicts with EU state aid rules should be taken care of at legislative level, not afterwards. State aid rules and the EU ETS system If the Union has adopted an instrument e.g. for combating CO2 emissions, like the EU ETS system, a MS which has adopted CO2 taxes as well, should not be obliged to apply that CO2 tax to enterprises taking part in the EU ETS system. State aide rules and Renewable Energy Sources (RES) vs. low carbon alternatives Renewable energy sources will play a major role in the EU energy system onwards. Support for Renewable Energy (RES) falls under the environmental guidelines and we have two reflections regarding this. First, as the climate change issue is a main priority for the EU it might be appropriate to analyze whether the scope is correct. Given the urgency of climate change it has to be considered if other low carbon technologies or carbon reducing technologies also should be within the scope of the environmental guidelines.

5 5 (5) Second, given that the amount for RES introduced in the EU it is important that this is made in a cost-efficient way. Integration of renewable energy sources into the energy markets has to be made in such a way that a competitive level playing field is created and that it distorts the market as little as possible. This is particularly evident already in the European electricity market, where it already is noted that some specific types of RES-support are indeed distorting competition. We argue therefor that support RES (or to a wider scope of low carbon technologies) has to be 1) participating in the market and subject to equal obligations as other market actors 2) limited in time and the goal has to be that the technologies will become competitive. State aide rules and energy infrastructure We have noted that the Commission is investigating the role of state aid in relation to infrastructure development, especially energy infrastructure. Our starting point is that infrastructural development in energy has to be driven by the development of the market and by needs for new infrastructure seen in the market signals and therefore also paid by the market participants. Therefor it is should not be a main priority for the state aide guidelines. We realize however that there might be cases with so called split incentives where other solutions have to be sought. However, we have difficulties in analyzing that aspect further at this juncture, as we do not know on what specific infrastructures or types of aid the Commission intends to focus. Hence we would welcome more details and clarification re the possible policies the Commission might pursue. Best Regards, Mrs. Maria Sunér Fleming Director Energy and Climate Policy Confederation of Swedish Enterprise Maria.suner.fleming@swedishenterprise.se The Confederation of Swedish Enterprise (Svenskt Näringsliv) is Sweden s largest and most influential business federation representing 50 member organizations and member companies with over 1.6 million employees. It was founded in 2001 through the merger between the Swedish Employers Confederation (SAF, founded in 1902) and the Federation of Swedish Industry (SI, founded in 1910). The Confederation of Swedish Enterprise is member of BUSINESSEUROPE.