Brussels, 29 th October 2009
State aid: Commission authorises Danish NO X tax reduction for cement industry; opens in-depth investigation into waste tax exemption
The European Commission has cleared under EC Treaty state aid rules a Danish proposal to grant certain reductions from a new tax on nitrogen emissions (NO X) for particularly heavy polluters. For industry which would be hit particularly hard by the tax, Denmark proposed two measures: the above mentioned NO X tax relief and a full exemption from the existing waste tax. Currently, only one company active in the cement industry would qualify to benefit from the two exemptions. The Commission concluded that the NO X tax relief was necessary and proportionate and as such in line with EU state aid rules. However, the Commission decided to open an in-depth investigation for the waste tax relief, because it had doubts as to the necessity and proportionality of the aid, in particular since the full exemption would leave the company with no incentive to contribute to the environmental objective of the waste tax. The opening of an in-depth investigation gives interested third parties a possibility to submit comments on the proposed measure. It does not prejudge the outcome of the procedure.
Competition Commissioner Neelie Kroes said " We need to limit state aid to situations where it is necessary and ensure that the beneficiary of an aid designed to further environmental goals has an incentive to contribute to this objective."
In June 2008, Denmark notified the Commission of two environmental tax reliefs for the cement industry. The proposed tax reliefs were part of an energy package including the introduction of a new tax on nitrogen oxides (NO X) as of January 2010. Since the cement industry would bear a particularly high tax burden due to the new tax, it was agreed to allow two tax reliefs from environmental taxes – one from the NO X tax itself, the other from the existing waste tax on certain waste from cement production.
Tax relief from environmental taxes can indirectly benefit the environment insofar as they enable the introduction or maintenance of a higher general environmental tax level than would otherwise have been possible. Such tax reliefs can therefore, if certain conditions are fulfilled, be considered to be compatible with the EC Treaty. In such cases it must however be demonstrated that the tax relief is necessary and proportionate in accordance with the rules set out in the EU Guidelines on State Aid for Environmental Protection (see and ).
As regards the proposed NO X tax reduction, the Commission concluded that the tax relief was necessary, since the tax would constitute a substantial increase of the beneficiary's production costs and it would be difficult for the beneficiary to cover such an increase without important sales losses. Since the beneficiary would still pay about 53% of the tax after the reduction, the Commission considered the proposed NO X tax relief was proportionate.
With respect to the full exemption from the waste tax, the Commission has doubts that the measure is necessary, since the waste tax, at least at this stage, does not seem to reflect a substantial part of the company's production costs. Moreover, the Commission has doubts as to the proportionality of the waste tax exemption, since it is a full exemption and thus leaves the beneficiary with no incentive to fulfil the objective of the waste tax.
The non-confidential version of the decisions will be made available under the case numbers and in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .