Second round of German ecotaxes proposed

Programme extended to heavy heating oil; tax breaks on the cards for low-sulphur fuels

German taxes on energy products are to be significantly raised again from 2000 under a draft bill approved by the cabinet yesterday. This second round of national ecotax reform will increase the level of several taxes introduced in 1999 and introduce new ones, including tax breaks for low sulphur road fuels and for natural gas used in efficient power stations.

Proposed increases for taxes on road fuels and electricity are in line with an outline agreement reached by the government in June (ENDS Daily 24 June). Other elements have arisen from political bargaining which ended only this week.

In particular, the plan includes introduction of a tax differential in favour of low sulphur diesel and petrol of euros 0.015 (DM0.03) per litre (ENDS Daily 12 August). The tax break will apply to fuels with less than 50 parts per million (ppm) sulphur on 1 November 2001 and to those with less than 10 ppm on 1 January 2003.

According a German environment ministry official, the agreement on sulphur in fuels was reached with difficulty, the minority Green party having wanted earlier introduction of the measure.

In return for compromising, however, the Greens won agreement for power stations burning oil or gas very efficiently to be exempted from current mineral oil taxes. The party wants to increase the competitiveness of gas against nuclear power, which is not subject to the tax, in order to help speed the government's planned phase-out of nuclear energy. Only power stations achieving conversion efficiencies above 55% would be eligible for the tax break.

As agreed in June, meanwhile, the government is proposing a euros 0.03 per litre increase in petrol and diesel taxes in each of the next four years, as well as four annual increases of euros 0.0025 per kilowatt hour of electricity.

The final element of the package is a proposal to introduce a new tax on heavy heating oil used in industrial processes. To date the tax has only been applied to light heating oil used for space heating.

The draft bill will now be debated during three readings in the Bundestag, the German lower house, and then the Bundesrat, and should enter into force on 1 January 2000 in the shape of amendments to the mineral oil tax and the energy tax laws.

Follow Up:
German environment ministry, tel: +49 228 3050;

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