BRUSSELS, April 16 (Reuters) – The European Union’s top court said on Thursday that Hungary’s tax on CO2 emission allowances, introduced in 2023, is against EU law, as it removes the operators’ incentive to invest in measures to cut emissions.
Hungary’s outgoing government, led by Viktor Orban whose party lost Sunday’s parliamentary election, imposed the tax on companies that receive a significant number of greenhouse gas emission permits for free.
The tax amounts to 36 euros ($42) per ton of annual emissions produced by each company.
The European Court of Justice sent the case back to the Veszprém High Court in Hungary – which initially referred it to the ECJ. “The Hungarian tax on CO2 emission allowances appears to be contrary to EU law, which it is for the national court to verify,” the ECJ ruling said.
Siding with Hungarian fertiliser maker Nitrogénművek, the ECJ said that Budapest’s scheme goes against the goals of the EU’s 2003 emissions trading directive, which is designed to reduce greenhouse gas emissions across the bloc.
It warned that a tax on free emission permits strips those permits of much of their financial value and removes the incentives that are meant to encourage companies to lower their emissions.
Orban’s government defied ECJ rulings on other matters in the past and the Hungarian constitutional court rejected a separate complaint against the decree in 2024.
There was no immediate comment from the TISZA party of Peter Magyar, who has pledged far-reaching reforms and said he hopes his cabinet can be sworn in by mid-May.
($1 = 0.8488 euros)
(Reporting by Gianluca Lo Nostro and Anita Komuves; Editing by Philippa Fletcher)
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