Consultation on Draft Guidelines on environmental and energy State aid for 2014-2020

To the European Commission

Diarienr: 76331988454-11
Jernkontorets diarienr: 1/14

Swedish steel industry is a highly specialized energy intensive industry which exports a large share of the production. The companies are exposed to fierce competition on the global market. To maintain competitiveness and the possibilities to continue a positive development concerning investments and business development in Sweden is of vital importance for both economic, environmental and social development.

It is of outmost importance that the various parts of policies and connected legislation are adapted to each other. It is a general problem that tax policies, state aid rules and environmental policies develops in different directions without considering the combined result that will affect the competiveness of industry.

The guidelines on environmental and energy aid (EEAG) need to allow Member states to offset 100% of the additional cost due to energy and environmental measures imposed on steel industry. Such exemptions must comprise the whole steel sector.

General comments
The EEAG have strong connections with the energy tax directive, 2003/96/EC (ETD) currently under revision. We believe that tax reductions and exemptions stated in ETD should be accepted in EEAG without further limitations or assessment. This would improve the clarity and simplification of the state aid policies and lead to a substantial cut in administration.

The EEAG proposal includes both strict formulated rules for state aid and paragraphs with more general discussions. It is unclear what purpose and status these descriptive paragraphs have. This makes the guidelines difficult to read and interpret which is not in line with the aim of simplification and better regulations.

The EEAG proposes a minimum %-level to be payed for non-harmonised environmental taxes or other levies on 15 or 20%. Such a threshold creates distortion both within EU as well as towards other world regions. It disfavours companies active in high tax member states. Full exemptions should be possible for beneficiaries.

Concerning energy related taxes and levies, reductions or exemptions help to shelter energy intensive industries from excessive cost to retain competitiveness. The EEAG refers in several cases to carbon leakage as an equivalent concept to this. It has to be observed that carbon leakage refers to an increase in greenhouse gas emissions outside EU and is relevant in view of the EU emission trading system and its related consequences. This concept and the criteria used are not directly transferable to other policy areas e.g. measures concerning electricity production.

The EEAG suggests that reductions and exemptions should be given to companies as a lump sum. We see no reason that the EEAG should define in what way member states handle such transfers. It is important to minimize administration for both member states and companies and to adapt to each national system for tax declaration.

Specific comments
Section 5.2 II, Aid granted by the way of certificates
It should be clarified that certificate schemes that do not involve transfer of state resources are clearly not state aid.

Section 5.6, Aid in the form of reductions in or exemptions from environmental taxes
168: The prime purpose of reductions or exemptions from environmental taxes is to protect industry from high costs that competitors don´t meet and which would undermine the competitiveness on the international market. This does not undermine the objective of the environmental tax as it enables the Member State to have differential tax levels.

Therefore the last sentence of paragraph 168 should be removed. The last part requires that
"the undertakings concerned should make a contribution to increasing environmental protection".
This is an unjustly sharpening of the demands.

171: Support systems should be approved for at least 10 years. The support systems should also be valid for the whole period for which the state aid has been granted, regardless of any changes in e.g. the EEAG during the period.

176: This paragraph handles a specific case concerning tax on energy products for electricity production which indirectly increases the cost for the electricity user. The paragraph should also include other taxes on electricity production. The text should be amended accordingly:
In case of a tax levied on energy products used or other production related taxes for electricity production….

176 a): Criteria that relate cost to value added has the problem of favouring sectors and companies with low value added. From the point of view of sustainable development this is not the direction in which industry wants to develop but rather towards lower relative energy intensity and higher value added. The proposed 5% is for such a parameter extremely high. Since this paragraph concerns non-harmonized taxes it is unclear if and how such criteria could be calculated on EU, national or company level.

176 b,c) Should be deleted, see general comments above.

178 b): In the existing environmental aid guidelines, 2008/C82/01 (EAG) this necessity criteria is supplemented with a reference to the definition of energy intensive industry in ETD art. 17:
With regard to energy products and electricity, ‘energy-intensive business’ as defined in Article 17(1)(a) of Directive 2003/96/EC shall be regarded as fulfilling this criterion as long as that provision remains in force.
This reference should remain.

179 a) The 20%- limit should be deleted, see general comments above.
In EAG (2008) the paragraph is complemented with:
…unless a lower rate can be justified in view of a limited distortion of competition
At least this amendment should be added.

5.7 Aid in the form of reductions in funding support for electricity from renewable sources
In case a support scheme is regarded as state aid there is also need for a possibility to exempt or compensate energy intensive industry from funding these schemes in order to maintain competitiveness. This should also comprise other support schemes like e.g. non-renewables and capacity markets.

184: As mentioned above the reference to carbon leakage is not relevant in this context. Criteria should be simple and general on an EU level. Since support systems for renewables are national the proposed criteria is impossible to use. Neither trade intensity nor cost increase related to value added can be fairly calculated on a national level since there are great differences in industrial structure.

We suggest that the criterion refers to the definition of energy intensive industry in ETD. Additionally, electricity used in facilities that perform chemical reduction, electrolytic or metallurgical processes or mineralogical processes according to ETD should be eligible for aid.

186: Should be deleted, see general comments above.

The Swedish steel producers' association

Bo-Erik Pers
Managing director

Helén Axelsson, Director Energy and Environment
Phone: +46 8 679 17 39