The European Commission has opened a formal investigation to examine whether Danish plans to grant CO2 tax exemptions to companies covered by the EU’s Emissions Trading Scheme (EU ETS) are compatible with EC Treaty state aid rules. The Commission is concerned that the measure might distort competition and run against the “polluter-pays” principle.
The Danish government plans to grant a full exemption to energy-intensive businesses covered by the EU ETS, and a reduction down to 50% of the EU minimum tax levels to businesses covered by the EU ETS which are not energy-intensive as part of a scheme to eliminate what it calls double regulation of CO2 emissions.
In Denmark, an existing CO2 tax is levied but with the proposed exemptions, the amount paid would be below the minimum rates set out by the EU.
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