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Estonian minister wants to lower natural gas excise duty to EU minimum rate for large consumers

Estonia's Minister of Economic Affairs and Infrastructure Kadri Simson wants to lower the natural gas excise duty rate for companies with higher energy consumption than the mineral industry to the minimum rate allowed in the EU.

A ceiling could be set on the excise duty rate after getting the European Commission's state aid permission, i.e. a state aid application must first be submitted to the EU executive, Simson said in the proposals she submitted to the government.

Beginning this year, the natural gas excise duty in Estonia is €3.87 per megawatt-hour, but according to the government's excise hike plans this figure will rise to €7.56 per megawatt-hour by 2020. The Ministry of Finance estimates that the final price of gas will increase by at least 15 percent as a result.

According to Simson, an increase in the price of gas would harm the competitive position of Estonian companies in the pulp and paper industries the most as these businesses are very energy-intensive, which makes the price of their products highly dependent on the price of gas.

The EU's minimum gas excise duty rate is €1.08 per megawatt-hour; the Estonian rate is currently 3.6 times higher, but by 2020 the difference is slated to be sevenfold.

The Estonian paper industry uses 23 million cubic meters of gas per year. At the 2017 duty rate, excise revenue would amount to €931,000 and at the 2020 rate to €1.8 million. The paper industry is the second-largest gas consumer among Estonian industries. The mineral industry is in third place, however it is exempt from the gas excise duty under the EU's energy taxation directive.

Given that exempting this sector from the excise was deemed justified when the directive was drawn up, Simson considered it justified not to levy the tax on more energy-intensive businesses either.

For businesses to use gas in the most economic way, the lowered excise duty rate would only be applied to companies whose energy management system was in keeping with ISO 50001 standards.

The proposed change would improve the competitiveness of energy-intensive companies and help maintain jobs in such sectors. A lower excise duty rate would also make Estonia more attractive to further investments, Simson believes.

The Estonian government also plans to reduce the electricity excise duty rate as well as map out more flexible direct connections to improve the competitiveness of energy-intensive businesses.

Editor: Editor: Aili Vahtla

Source: BNS

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