The European Commission has concluded that two Swedish tax exemption schemes for non-food-based biogas and bio-propane used for heating or as motor fuel are in line with EU State aid rules.
The Swedish tax exemption schemes aim to increase the use of biogas and bio-propane and reduce the use of fossil fuels and their greenhouse gas (GHG) emissions. The tax exemptions apply to both domestic and imported biomethane (aka renewable natural gas – RNG) and bio-propane (bioLPG).
The original schemes were first approved by the Commission under EU State aid rules in 2003 for the motor fuel scheme (SA.14126) and in 2007 for the heating fuel scheme (SA.22194).
The motor fuel scheme was further prolonged in December 2015 (SA.43302) and the heating fuel scheme in July 2018 (SA.49893).
On June 29, 2020, the Commission approved the prolongation until December 31, 2030, of two Swedish schemes that exempt from energy and carbon dioxide (CO₂) taxation: (i) biogas and bio-propane that is used in heat generation, and (ii) biogas and bio-propane that is used as motor fuel.
The estimated budget for the period 2021-2030 was €550 million (SEK 5.94 billion) for the heating fuel scheme and €477 million (SEK 5.15 billion) for the motor fuel scheme.
The Commission found both schemes compatible with EU State aid rules, particularly the 2014 Guidelines on State Aid for Environmental Protection and Energy (EEAG).
Completed investigation
However, on December 21, 2022, the General Court annulled the two 2020 Commission decisions on procedural grounds.
The General Court concluded that the Commission should have opened a formal investigation procedure to assess whether the tax exemptions combined with support from other Member States, such as Denmark, led to the overcompensation of biogas producers.
Following the General Court’s judgment, the Commission opened an in-depth investigation on January 30, 2024, to re-examine the compatibility of the tax exemption schemes under EU State aid rules, particularly the 2014 EEAG and the 2022 Guidelines on State aid for climate, environmental protection and energy (CEEAG).
In particular, the Commission has investigated whether the potential cumulation of aid may lead to overcompensation in favour of those producers when they sell biogas in Sweden.
The Commission’s investigation confirmed that the Swedish tax exemption schemes comply with EU State aid rules, in particular with the 2014 EEAG and the 2022 CEEAG.
In particular, the Commission concluded that the schemes contribute to the development of renewable energy, in line with national and EU energy and climate objectives, and that they are:
- necessary to address residual market failures that would prevent the biogas and bio-propane from being sold to the extent needed to contribute to the environmental objectives under the schemes;
- appropriate to incentivize the consumption and production of sustainable non-food-based biogas and bio-propane;
- proportionate, as the aid under the schemes does not exceed the difference between the higher costs of sustainable non-food-based biogas and bio-propane and the costs of natural gas and liquefied petroleum gas (LPG), respectively.
Moreover, the Commission did not receive any concrete evidence that the tax exemptions combined with support from other Member States, notably Denmark, led to the overcompensation of biogas producers.
In addition, the Commission’s investigation confirmed that both Sweden and Denmark consider the impact of potential support from other Member States when monitoring their schemes and that the risk of overcompensation is appropriately addressed through the combination of the Swedish and Danish monitoring mechanisms.
Our in-depth investigation has confirmed that these tax exemption schemes for biogas and bio-propane are in line with EU State aid rules. The measures support the consumption of sustainable fuels, thereby contributing to the transition towards a net-zero economy, commented Margrethe Vestager, EVP in charge of competition policy.
