L 32 - 2011-12 - Bilag 34: Henvendelse af 13/12-11 fra Aalborg Portland

We have been requested to provide Aalborg Portland A/S (hereinafter, “AalborgPortland”)witha preliminary assessment on the scope of the compatibility provisions laid down by theEU guidelineson State aid for environmental protection1(hereinafter, the “EUGuidelines”)with specific regard to atax regime currently under discussion by the Danish Government.The latter is in fact amending the national provisions concerning the tax regime for Nox emissionsfrom cement production in light of the outcomes of the State aid procedure carried on by theEuropean Commission in case N 327/20082.In this respect, it should be briefly recalled that from January 2010 Denmark is introducing a newtax on nitrogen oxides emissions (hereinafter the “NOxTax”).By the introduction of the NOx

Tax, Denmark aims at decreasing NOx emissions from energy used in stationary plants andcontributing to the fulfilment of Denmark NOx emissions ceilings under Directive 2001/81/EC3and the UNECE Geneva Convention on Long Range Trans Boundary Air Pollution. The NOxTax is in fact the only regime in Denmark that helps to decrease the Nox emissions.Since the NOx Tax will impact on large plants, in the fulfilment of its competences on taxation andin view of guaranteeing a sound fiscal pressure on the undertakings concerned the DanishGovernment introduced two categories of reductions namely: (a) tax reduction for companies withexceptionally high NOx emissions and (b) tax reductions for undertakings that install equipmentsto reduce the NOx emissions. Both reductions are considered as “bottom deductions” (hereinafter,the “NOxBottom Deductions”).Considering that the cement industry (which is an energy-intense industry) on the basis of the“polluters pays principle” would have to afford the highest costs for the NOx Tax, the DanishGovernment decided to combine the abovementioned NOx Bottom Deductions with a waste taxexemption for certain types of waste which are treated by the producer (hereinafter, the “WasteTax Exemption”).In the Danish Authorities aims, the Waste Tax Exemption was thereforestructured in conjunction with the NOx Tax in view of decreasing the related fiscal pressure on theundertakings concerned.The NOx Bottom Deductions were both assessed by the Commission and considered compatiblewith the European State aids rules in the Decision N 327/2008. In this assessment, theCommission noted that the NOx Tax had a deep impact on the cement industry and consideredthat the bottom relief for this industry was justified with the necessity to avoid a loss ofcompetitiveness or market share, while at the same time yielding an environmental impact4.According to the information currently available, the Danish Government has suggested anincrease of the tax rate and in the same time an effective reduction of 50% of the NOX bottomDeduction for the Cement Industry.The envisaged amendments seem capable to disproportionally jeopardizing Aalborg Portland’sactivity since they do not provide any specific exemption to the benefit of the undertakings whichhave already duly complied with the Best Available Technique (“hereinafter “BAT”) benchmarks,facing the related costs.

Articles 107 and 108 of the Treaty on the Functioning of the European Union (hereinafter“TFEU”) lay down the notion of State aid and a general prohibition for the Member States togrant such measures without prior notification and approval by the European Commission5.Provided that they comply with the prior notification obligation, the Member States are allowed togrant State aid measures which are compatible with the EU market according to the derogatoryobjectives laid down in particular by Article 107, para. 2 or para. 3 TFEU6.As far as the environmental protection’s objective is concerned, the European Guidelines clarifyspecifically the criteria under which a State aid measure may be considered compatible with the EUmarket.5

According to Article 107, para. 1, TFEU, “Saveas otherwise provided in the Treaties, any aid granted by aMember State or through State resources in any form whatsoever which distorts or threatens to distort competition byfavoring certain undertakings or the production of certain goods shall, in so far as it affects trade between MemberStates, be incompatible with the internal market”.According to Article 108, para. 3 TFEU, “theCommissionshall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If itconsiders that any such plan is not compatible with the internal market having regard to Article 107, it shall withoutdelay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposedmeasures into effect until this procedure has resulted in a final decision”.According to Article 107, paras. 2 and 3, “Thefollowing shall be compatible with the internal market: (a) aidhaving a social character, granted to individual consumers, provided that such aid is granted without discriminationrelated to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters orexceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected bythe division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages causedby that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from theCommission, may adopt a decision repealing this point. 3. The following may be considered to be compatible with theinternal market: (a) aid to promote the economic development of areas where the standard of living is abnormally lowor where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural,economic and social situation; (b) aid to promote the execution of an important project of common European interest orto remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certaineconomic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extentcontrary to the common interest; (d) aid to promote culture and heritage conservation where such aid does not affecttrading conditions and competition in the Union to an extent that is contrary to the common interest; (e) such othercategories of aid as may be specified by decision of the Council on a proposal from the Commission”.

In particular, Chapter 4 of the EU Guidelines (from point 151 to point 159) provides the criteriawhich are applicable, on grounds of compatibility, to any State aid measure in the form of “reductionsof or exemptions from environmental taxes”(hereinafter “Chapter4”).In this respect, the relevant case-law confirms that the European Commission considers thatChapter 4 lays down theexhaustivelegal framework for the assessment of the admissibility of a taxexemption under State aid law7. This means that the introduction of a tax exemption aimed atincreasing the environment’s protection is not prohibited in principle but may be compatible withthe relevant EU legal framework if (upon positive assessment) the measure in question complieswith the compatibility criteria provided in Chapter 4.When assessing upon notification a tax exemption under Chapter 4, according to point 151 of theEU Guidelines the European Commission considers as compatible with the common market anyaid in the form of reductions of environmental taxes if the measure in question contributes at leastindirectly to an improvement of the level of environmental protection and if it does not underminethe general objective pursued8. This is consistent with the effectiveness principle according towhich any assessment by the Commission is to be conducted under a substantial point of viewconsidering the actual effects of the measure in question.In this respect, it emerges therefore that point 151 allows any exemptions which are aimed atavoiding any unjust detriment to the undertakings which have complied with the BAT requirements,thus ensuring that the exemptions in question actually display an incentive effect towards thethorough implementation of the BAT benchmark and therefore the fulfillment of the relatedenvironmental goals.As mentioned in Chapter 4 at point 154 of the EU Guidelines, in order to be compatible with theEU market the tax exemptions shall comply in particular with the conditions set forth by points155-159.Point 159 of the EU Guidelines provides several criteria in view of determining if a tax exemptionis proportionate with regard to the fulfillment of the related environmental goal, stating that:“The Commission will consider the aid to be proportional if one of the following conditions is met:a) the scheme lays down criteria ensuring that each individual beneficiary pays a proportion of thenational tax level which is broadly equivalent to the environmental performance of each individualbeneficiary compared to the performance related to the best performing technique within the EEA.Under the aid scheme any undertaking reaching the best performing technique can benefit, at most,from a reduction corresponding to the increase in production costs from the tax, using the bestperforming technique, and which cannot be passed on to customers. Any undertaking having aworse environmental performance shall benefit from a lower reduction, proportionate to itsenvironmental performance[emphasis added];

b) aid beneficiaries pay at least 20 % of the national tax, unless a lower rate can be justified in viewof a limited distortion of competition;c)the reductions or exemptions are conditional on the conclusion of agreements between the MemberState and the recipient undertakings or associations of undertakings[…]”.With regard to the proportionality criteria listed above under letters a, b and c, it can be confirmedthat they are alternative (and not cumulative) in character. In this respect, it should be underlinedthat point 159 states explicitly that the proportionally parameter is satisfied “ifone of”the conditionsis met.According to the EU Guidelines, therefore, the fulfillment of the condition set forth under point159, lett. a) ensures the full respect of the proportionality criterion and thus the compatibility of theexemption in question with the relevant State aid provisions.Therefore, the compliance with the BAT benchmark represents one of the elements to bepositively assessed under point 159, lett. a) of the EU Guidelines in order to determine thecompatibility of the tax exemption in question under Chapter 4.

In light of the above, in view of complying with the EU legal framework on State aid, the DanishGovernment is allowed to amend the tax regime under discussion by providing specific exemptionsaccording to the compatibility criteria set forth under Chapter 4 of the EU Guidelines.With specific regard to the conditions set forth under point 159 of the EU Guidelines, the verywording of the provision as well as the related case law confirm that the proportionalityrequirement is met when one of the conditions is satisfied. Accordingly, the fulfillment of the BATbenchmark by the beneficiary undertaking and the fact that the related costs “cannotbe passed on tocustomers”should be positively assessed in order to consider the tax exemption’s compliance underpoint 159, lett. a) of the EU Guidelines.***