Germany allows carbon tax exemptions for industry, with strings

FRANKFURT, March 31 (Reuters) - Germany's cabinet on Wednesday passed regulations to waive parts of a new emissions tax for industry, which will collectively save companies 270 million euros ($317 million) this year and 330 million euros in 2022.

The bill allows firms that operate internationally to be compensated when paying a tax levied since Jan. 1 on the greenhouse gas emissions of suppliers or consumers of German heating and transport fuel.

Under its terms, companies benefiting from the exemption have to commit most of the resulting savings to decarbonising their operations.

Officials said the bill was based on a recognition that the global focus of industrial groups like steel, chemicals, or car makers made it harder for them to hike prices to recover the tax without losing their competitive edge against foreign rivals.

"It is important that Germany remains an attractive location for industry," said environment minister Svenja Schulze.

Individual levels of compensation under the Carbon Leakage bill are graded according to the intensity of each company's emissions.

The tax sets a carbon dioxide (CO2) emissions equivalent price on gasoline, diesel, heating oil, coal and natural gas consumption, sectors that were previously not included in the European Emissions Trading Scheme (ETS).

By collecting an initial 25 euros per tonne CO2 equivalent, the government expects to raise 7.4 billion euros from the tax this year. It will then rise annually to reach 55 euros per tonne by 2025, after which pollution permits will be auctioned. L8N2LN5ZB

The money will go towards capping a renewable energy support charge levied on retail electricity, compensating commuters for rising travel costs, and industry offsets.

The bill will be presented to parliament for approval and must pass European Commission scrutiny with regards to state aid prevention.

($1 = 0.8518 euros)

Reporting by Vera Eckert and Markus Wacket; Editing by Jan Harvey

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