LUXEMBOURG (CN) - The Czech Republic can't tax more than 10 percent of free greenhouse gas emission allowances, the European Court of Justice ruled.
Czech electricity producer Sko-Energo disputed such a tax in light of the Emissions Trading Directive, which stipulated that EU member states were to allocate at least 90 percent of those allowances free of charge.
Legislators in the Czech Republic imposed a 32 percent gift tax on electric utilities companies' acquisition of greenhouse gas emission allowances in 2011 and 2012.
But the EU court ruled in Sko-Energo's favor Thursday, holding that gift tax is incompatible with the directive because it doesn't respect the directive's 10 percent ceiling.
"The allocation of 'free of charge' in Article 10 of Directive 2003/87 precludes not only the direct fixing of a price for the allocation of emission allowances but also the subsequent levying of a charge in respect of their allocation," the EU court ruled.
The Supreme Administrative Court of the Czech Republic had asked the EU court to decide on the issue.
"The answer to the question referred is that Article 10 of Directive 2003/87 must be interpreted as precluding the imposition of a gift tax such as that at issue in the main proceedings if it does not respect the 10% ceiling on the allocation of emission allowances for consideration laid down in that article, which is a matter for the referring court to determine," the ruling states.
Czech's reason for the 32 percent tax - generating more money for green energy producers - doesn't fly because that's not one of the goals of the emissions directive, the EU court ruled.
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