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Commission's proposed tax on biomass fuels is simply unacceptable – Svebio

Responding to the European Commission's recently presented "Fit for 55" package, the Swedish Bioenergy Association (Svebio) says that the proposal to introduce taxes on all types of biomass fuels is "simply unacceptable".
"The new and increased taxation of renewable and sustainable biofuels is surprising and creates uncertainty for investors. It is the wrong time to increase taxation on renewable energy sources when the transition must be accelerated," said Gustav Melin, CEO of Svebio.

Responding to the European Commission’s recently presented “Fit for 55” package, the Swedish Bioenergy Association (Svebio) says that the proposal to introduce taxes on all types of biomass fuels is “simply unacceptable”. For solid biomass fuels used in heat production such as at Falu Energi & Vatten’s Västermalmsverket combined heat and power (CHP) plant in Falun, Sweden, a tax of approximately EUR 1.57 per MWh is proposed with the tax to be levied when the fuels are used in plants larger than 5 MW.

On July 14, 2021, the European Commission presented its “Fit for 55” package. Amongst other things, it included a revision of the Energy Taxation Directive (ETD) that proposes to “align the taxation of energy products with EU energy and climate policies, promoting clean technologies and removing outdated exemptions, and reduced rates that currently encourage the use of fossil fuels”.

According to the Commission, the new rules are aimed at reducing the harmful effects of energy tax competition, helping secure revenues for Member States from green taxes, which it says are less detrimental to growth than taxes on labour.

Our efforts to tackle climate change need to be politically ambitious, globally coordinated, and socially fair. We are updating our two-decades-old energy taxation rules to encourage the use of greener fuels and reduce harmful energy tax competition, said Paolo Gentiloni, Commissioner for Economy on July 14, 2021, during the launch.

Thus far the Energy Taxation Directive has only applied with a minimum level for fossil fuels and for electricity but the Commission is now proposing that all renewable fuels should also be subject to a minimum tax. Possible exceptions may be granted for electricity production and for advanced biofuels.

Biofuels from arable crops would be subject to a higher taxation rate, comparable to the tax on fossil fuels. For solid biomass fuels used in heat production, a tax of approximately EUR 1.57 per MWh is proposed with the tax to be levied when the fuels are used in plants larger than 5 MW.

The European Commission proposes to introduce a tax on all types of biofuels, both liquid biofuels, and solid biofuels. The new and increased taxation of renewable and sustainable biofuels is surprising and creates uncertainty for investors. It will undoubtedly complicate the transition and increase the use of fossil fuels. It is the wrong time to increase taxation on renewable energy sources when the transition must be accelerated. It is simply unacceptable, said Gustav Melin, CEO of Svebio.

Svebio points out that on the one hand, the Commission says that it wants to invest in district heating but a tax on biomass fuels will put district heating at a disadvantage in relation to electric heating. Furthermore, the proposals for heat plant size dependant taxation rates or different taxes depending on which renewable fuel or biomass fuel production method is used opens up for unreasonable administration and control.

“Taken together with the Commission’s proposal for taxonomy and restrictions for arable biofuels in the Renewable Energy Directive (RED), as well as proposals for new sustainability criteria for forest-based biofuels, the European Commission shows a lack of insight into the potential of bioenergy to contribute to climate change. The result is a slower transition and difficulties in achieving the ambitious climate goals in a cost-effective way. The Swedish government should reject the proposals for taxation of biofuels in the forthcoming consideration of the energy tax directive,” says Gustav Melin, CEO of the Swedish Bioenergy Association (Svebio).

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