Bayer to Linde May Keep German Tax Cut Through 2020 in EU Plan

The European Union is weighing plans allowing Germany to give companies that consume high amounts of power discounts on national environmental taxes until the end of 2020.

EU nations would be allowed to exempt companies such as steelmakers or polyvinyl chloride producers from paying the full amount of the taxes, according to the draft rules being prepared by officials in the European Union’s competition department.

“To avoid that undertakings particularly affected by the funding of renewable energy support are put in a difficult competitive situation, member states may wish to grant partial compensation for additional costs,” according to the undated document obtained by Bloomberg News. “The aid should be targeted to avoid that without a reduction in the financing burden, certain sectors are at risk of relocating outside the EU.”

The aid rules would be a victory for German Chancellor Angela Merkel, who’s pledged to “fight resolutely” in Brussels for the waivers, which free companies from paying the full levy to support the country’s clean-energy expansion. She argued that power-fee waivers granted to energy-intensive companies are vital for the German economy’s global competitiveness, as U.S. rivals take advantage of low-cost shale-gas.

The draft measures could still be amended before they are scheduled to be adopted in the first half of 2014.

“This is an internal working draft which can in no way be interpreted as an official position of the commissioner or” the European Commission, Antoine Colombani, spokesman for EU Competition Commissioner Joaquin Almunia, said in an e-mail.

Fee Waivers

Germany granted power-fee waivers this year to 1,716 companies or units -- more than twice as many as in 2012 -- and amounting to about 4 billion euros ($5.4 billion), according to data from the country’s authorities. This year’s list includes companies from drugmaker Bayer AG to gas producer Linde AG.

HeidelbergCement AG, Vattenfall Europe Mining AG and units of ThyssenKrupp AG also benefit from the tax cut.

Under the draft EU plans, governments would be allowed to grant power-fee waivers to producers of aluminum, copper, fertilizers, paper, cotton, chemicals and some plastics if they face “a substantial increase in production costs.”

Merkel has said competitive energy prices are key to the country’s industry as it shutters nuclear reactors and seeks to increase the share of renewables to 80 percent of the power mix.

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