Designing environmental taxes to promote biofuels from a State aid perspective: The impact of the Energy Taxation Directive on assessing selectivity of the Swedish and Finnish energy taxation systems
(2019) JAEM03 20191Department of Law
Faculty of Law
- Abstract
- To comply with the Paris Agreement and to deal with the threat caused by climate change, the Swedish Parliament has set ambitious targets for greenhouse gas (GHG) reductions. For the transport sector, which accounts for 30 % of total GHG emissions, a milestone target is to reduce GHG emission by 70 % by 2030 compared to 2010 (2030 goal). Biofuels is in this respect considered decisive to reach the 2030 goal. To promote its use, Sweden, like many other Member States, has primarily relied on tax reliefs, which in Sweden has come in the form of exemptions from its energy tax and CO2 tax, which together form the Swedish energy taxation system.
Member States’ freedom to design environmental taxes to promote for example biofuels is however... (More) - To comply with the Paris Agreement and to deal with the threat caused by climate change, the Swedish Parliament has set ambitious targets for greenhouse gas (GHG) reductions. For the transport sector, which accounts for 30 % of total GHG emissions, a milestone target is to reduce GHG emission by 70 % by 2030 compared to 2010 (2030 goal). Biofuels is in this respect considered decisive to reach the 2030 goal. To promote its use, Sweden, like many other Member States, has primarily relied on tax reliefs, which in Sweden has come in the form of exemptions from its energy tax and CO2 tax, which together form the Swedish energy taxation system.
Member States’ freedom to design environmental taxes to promote for example biofuels is however limited by Union objectives relating to the functioning of the internal market. More specifically, Article 107(1) TFEU prohibit, with certain exemptions, State aid “favouring certain undertakings or the production of certain goods”, that is to say selective aid. Moreover, energy taxes, such as the Swedish energy and CO2 taxes – as well as the Finnish equivalents – are considered harmonised excise duties under the Energy Taxation Directive (ETD). The ETD provides in this respect for motor fuels to be taxed on the basis of volume rather than environmental performance, which means that tax reliefs in favour of biofuels will derogate from the main rule in the ETD and therefore face the risk of constituting selective aid. Assessing tax selectivity is however, as is well known, far from a straightforward task. This is illustrated not the least by the fact that the Commission has continuously considered that the Swedish tax exemptions entails selective aid in favour of biofuel producers, while seemingly accepting that this is not the case in relation to the Finnish energy taxation system, which, although not formally promoting biofuels, nevertheless grants tax reliefs to biofuels under its CO2 tax scheme due to biofuels lower emissions in a life-cycle perspective.
Against this background, this thesis deals with the issue of selectivity in the context of the Swedish and Finnish energy taxation systems. The thesis analyses the impact of the ETD on the three-step test developed in the CJEU’s case-law to assess selectivity of tax measures, reviewing to this end whether the Swedish and Finnish energy taxation systems are in fact selective. The thesis shows that the internal logic of the ETD, ie taxing all motor fuels on the basis of volume rather than environmental performance, becomes of paramount importance in this analysis as only objectives internal to a tax system may be relied on for the purpose of the selectivity analysis. As both the Swedish and the Finnish energy taxation systems (despite the Finnish being treated otherwise) in fact appears to be selective – due to the internal logic of ETD – the thesis concludes that it is imperative that the ETD is revised to enable environmental taxes that is properly oriented towards environmental objectives to not constitute selective aid. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8983529
- author
- Schiebe, Torbjörn LU
- supervisor
- organization
- course
- JAEM03 20191
- year
- 2019
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- State aid, Selectivity, Environmental taxes, Energy Taxation Directive, Biofuels
- language
- English
- id
- 8983529
- date added to LUP
- 2019-06-20 16:30:42
- date last changed
- 2019-06-20 16:30:42
@misc{8983529,
abstract = {{To comply with the Paris Agreement and to deal with the threat caused by climate change, the Swedish Parliament has set ambitious targets for greenhouse gas (GHG) reductions. For the transport sector, which accounts for 30 % of total GHG emissions, a milestone target is to reduce GHG emission by 70 % by 2030 compared to 2010 (2030 goal). Biofuels is in this respect considered decisive to reach the 2030 goal. To promote its use, Sweden, like many other Member States, has primarily relied on tax reliefs, which in Sweden has come in the form of exemptions from its energy tax and CO2 tax, which together form the Swedish energy taxation system.
Member States’ freedom to design environmental taxes to promote for example biofuels is however limited by Union objectives relating to the functioning of the internal market. More specifically, Article 107(1) TFEU prohibit, with certain exemptions, State aid “favouring certain undertakings or the production of certain goods”, that is to say selective aid. Moreover, energy taxes, such as the Swedish energy and CO2 taxes – as well as the Finnish equivalents – are considered harmonised excise duties under the Energy Taxation Directive (ETD). The ETD provides in this respect for motor fuels to be taxed on the basis of volume rather than environmental performance, which means that tax reliefs in favour of biofuels will derogate from the main rule in the ETD and therefore face the risk of constituting selective aid. Assessing tax selectivity is however, as is well known, far from a straightforward task. This is illustrated not the least by the fact that the Commission has continuously considered that the Swedish tax exemptions entails selective aid in favour of biofuel producers, while seemingly accepting that this is not the case in relation to the Finnish energy taxation system, which, although not formally promoting biofuels, nevertheless grants tax reliefs to biofuels under its CO2 tax scheme due to biofuels lower emissions in a life-cycle perspective.
Against this background, this thesis deals with the issue of selectivity in the context of the Swedish and Finnish energy taxation systems. The thesis analyses the impact of the ETD on the three-step test developed in the CJEU’s case-law to assess selectivity of tax measures, reviewing to this end whether the Swedish and Finnish energy taxation systems are in fact selective. The thesis shows that the internal logic of the ETD, ie taxing all motor fuels on the basis of volume rather than environmental performance, becomes of paramount importance in this analysis as only objectives internal to a tax system may be relied on for the purpose of the selectivity analysis. As both the Swedish and the Finnish energy taxation systems (despite the Finnish being treated otherwise) in fact appears to be selective – due to the internal logic of ETD – the thesis concludes that it is imperative that the ETD is revised to enable environmental taxes that is properly oriented towards environmental objectives to not constitute selective aid.}},
author = {{Schiebe, Torbjörn}},
language = {{eng}},
note = {{Student Paper}},
title = {{Designing environmental taxes to promote biofuels from a State aid perspective: The impact of the Energy Taxation Directive on assessing selectivity of the Swedish and Finnish energy taxation systems}},
year = {{2019}},
}