Gas tax clause threatens German ecotax bill

States, industry, still arguing over threshold for efficient power station tax exemption

Germany's ecological tax reform bill is still in the balance due to a row over gas power stations, despite the measure's successful adoption last week by the Bundestag, or lower house of parliament. The main sticking point is the SPD/Green governing coalition's proposal to exempt very efficient gas-fired power stations from mineral oil tax, which is still being disputed both within the government and between it and the opposition.

The row is expected to boil over once more when the ecotax bill is debated later this week in the Bundesrat, where Germany's states are represented. Although ecological tax is a federal matter and therefore the Bundesrat cannot veto the government's resolution, it can, with a majority vote, force the bill to go to a conciliation committee which would then have to strike a compromise between the two parliamentary houses.

The main opposition party, the centre-right Christian Democratic Union (CDU), is likely cast its 28 votes in favour of conciliation in an attempt to upset the whole bill. More ominously for the government, the SPD premier of the coal-producing state of North Rhine Westphalia has said he may also push for conciliation due to the gas exemption clause. Together, the CDU states and North Rhine Westphalia account for 34 votes in the Bundesrat, one short of an overall majority.

If the ecotax bill is forced to the conciliation committee, a likely outcome is a further increase in the level of efficiency gas-fired power stations must attain to be exempted from tax. A Bundesrat official told ENDS Daily today that the North Rhine Westphalia government is rumoured to be pushing for an increase from the current level of 57.5% to 60%.

Germany's most biggest and most influential power utility, RWE, has also been lobbying vociferously for the efficiency threshold to be raised, claiming that the production costs of coal will have to be reduced by 25% in order for coal to remain competitive if the threshold remains 57.5%.

Meanwhile, the Mecklenburg Pomerania environment ministry has expressed fears that plans to build an efficient gas power station in the state could be derailed even with a threshold of 57.5%. The figure was raised from the original proposal of 55% two weeks ago after a last minute change of position by the SPD under pressure from coal mining interests (ENDS Daily 8 November).

Christian Gotthardt, strategic adviser at the German Swedish consortium Vasa Energy which is planning the power station, told ENDS Daily that 57.5% was the maximum efficiency attainable currently. A further rise in the threshold to 60% would clearly make it even more difficult for new gas-fired projects to succeed.

Follow Up:
Bundesrat, tel: +49 228 91000; Mecklenburg Pomerania environment ministry, tel: +49 385 5880; Vasa Energy, tel: +49 4036 0040.

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