German gas power tax breaks win EU approval

Most efficient stations win five-year ecotax exemption in spite of "possible" trade distortion

The European Commission today approved a request by Germany to exempt highly efficient new natural gas-fired power stations from taxes imposed on other "mineral oils," despite finding that the measure could distort EU trade. The exemption will, however, last only for five years rather than ten as Germany first requested.

Any new gas fired power station achieving at least 57.5% efficiency commissioned between the end of 1999 and 1 January 2004 will be eligible for the tax break. Each operator affected will not have to pay mineral oil tax for a period of five years.

In today's statement the Commission says that the tax break does conform with EU rules on state aid for environmental protection because it promotes energy conservation, even though it considers the measure could distort trade and competition within the Community by favouring "certain domestic forms over others in a sector where there is trade between member states".

The tax break was included in the second round of Germany's ecological tax reform by the co-governing Green party, which wanted to favour alternatives to nuclear power (ENDS Daily 26 August 1999). The plan caused bitter fighting within the coalition, nearly up-ending the whole ecotax programme (ENDS Daily 19 November 1999). When the European Commission approved the ecotax reform under EU state aid rules, it reserved judgement on the gas power station tax break (ENDS Daily 15 February).

Germany's environment ministry today welcomed the decision, saying that new combined cycle gas-fired power stations would make an important contribution to achieving climate protection targets.

Follow Up:
European Commission, tel: +32 2 299 1111, and press release; German environment ministry, tel: +49 30 28550, and press release.

Please sign in to access this article. To subscribe, view our subscription options, or take out a free trial.

Please enter your details

Forgotten password?

Having trouble signing in?

Contact Customer Support at
or call 020 8267 8120

Not a subscriber?

Take a free trial now to discover the critical insights and updates our coverage offers subscribers.