BRUSSELS, Belgium -- The European Commission today approved a German request for several sectors to be exempted from its national energy tax program, ending long running negotiations between EU Competition Commissioner Mario Monti and Germany's Finance Minister Hans Eichel.
Monti called Germany's request "an important test for the Commission's guidelines," adding that the decision proved that the burden of extra taxation could be relieved for some companies "without compromising the fundamental objective of environmental protection."
Approval was granted for 10 years for all but one of the requested exemptions. This is the first time that 10 year exemptions have been allowed under new guidelines for environmental state aid adopted on January 1, 2001.
The main measures approved today are a 10 year, 80 percent reduction in tax increases for heating oil used by agriculture, forestry and fisheries, and a reduced tax rate of 20 percent on electricity for the same sectors.
The cogeneration industry, which generates heat as well as power from fuel combustion, won "favorable tax treatment" for its input fuels.
Taxes on electricity used by rail transport operators and fuel used by local public transport will be halved.
The Commission granted a five year rather than 10 year "tax cap" for energy intensive industries, pending carbon dioxide emissions figures for 2004.
The approval came after "difficult negotiations," a Commission official told reporters. He said that the new rules require "binding agreements from industry" and that the German government had now agreed to monitor industry's voluntary climate change commitments in 2004.
To limit global warming, in November 2000 German industry agreed to cut carbon dioxide emissions levels by 28 percent by 2005 from 1990 levels. In exchange, the government pledged to impose no further ecotaxes in certain sectors.
Germany's Environment Minister Juergen Trittin welcomed the commission's decision, which he views as confirmation that "Germany is taking the right path with its ecological tax reforms."
Trittin was particularly pleased that other input fuels for cogeneration plants has been put on a level footing with coal, which is already subsidized.
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