CJEU: Romanian windfall tax compatible with EU law
The CJEU has confirmed that the Romanian windfall tax imposed on renewable energy producers between November 2021 and March 2022 is not contrary to the rules governing the functioning of the European energy market and climate targets as defined by EU law.
Romania introduced a special 80% tax levied on revenues generated from the sale of electricity at prices above a specified threshold for the period from 1 November 2021 to 31 March 2022. However, producers of electricity from fossil fuels, including those engaged in combined heat and power generation, and producers of electricity from biomass, were exempt from this tax. This period preceded the introduction of a similar measure by Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address with high energy prices.
A company that is a member of a French corporate group and produces wind energy in Romania objected to several inconsistencies with EU law in this legislation. The Romanian court summarised them and requested a preliminary ruling on whether:
- this constituted unauthorised state aid to entities not subject to this tax, which would be granted contrary to Article 107(1) TFEU
- the tax created obstacles to the free movement of services and was thus contrary to Articles 49 and 56 TFEU
- the tax was contrary to the rules of the European energy market contained in Directive (EU) 2019/944 on electricity market
- the tax was contrary to the climate objectives and Regulation (EU) 2021/1119 on climate neutrality.
The CJEU considered the first two questions inadmissible, primarily because the referring court had not sufficiently substantiated the alleged conflict with EU law.
Pertaining to the third question, the CJEU stated that the tax was not contrary to Directive (EU) 2019/944 on the electricity market, because it at least in part pursued a budgetary objective and did not aim to regulate electricity supply or ensure the protection of consumer or free competition.
On the last question, the CJEU stated that a tax that places a short-term burden on producers from clean sources is not contrary to Regulation (EU) 2021/1119 on climate neutrality, given the temporary nature of the tax and its inability to influence greenhouse gas emissions in the long term.