Second Win For the Nuclear Industry in Germany Shatters Legal Design of Nuclear Phase Out - Case Comment BVerfG2 BvL 6/13

After ruling in December 2016 that the acceleration of the nuclear phase-out in Germany by the Merkel administration was not sufficiently designed to seal it off against compensation claims, the German Federal Constitutional Court (BVerfG) yesterday delivered a second blow to the policy of phasing out nuclear power in Germany. The BVerfG declared the so called fuel element tax (Brennelementesteuer) null and void. In a groundbreaking statement the court shut down the possibilities for the state to `ìnvent` taxes, which has consequences for a proposed carbon tax in Germany.

The fuel element tax was introduced in 2011 and was operative until the end of 2016. Under this tax regime energy companies had to pay a certain sum for every fuel element they were using in a nuclear reactor. The German constitution features a catalogue of taxes that may be imposed by national governments. Article 106 (1) No 2 German constitution gives the nation state government the right to introduce so called consumption taxes. The German government argued that the fuel element tax could be categorized as a consumption tax.

Consumption taxes are targeting consumers via companies as intermediaries. The most prominent energy-related consumption tax in Germany is the petroleum tax. This tax is paid by energy companies to the state for every litre of gasoline they are selling. However, the owner of petrol stations recoup that money from motorists (end-consumers) at the pump, as they add a certain amount to the price of gasoline.

The German Constitutional Court (BVerfG) now decided that fuel elements in nuclear reactors are not consumption goods, so that the category of consumption tax does not apply (
Instead, the court categorized fuel elements of nuclear reactors as production goods. The court reasoned that, when establishing the fuel element tax, the German legislator did not envisage an increase in electricity prices, but assumed that the price for the consumer would not be affected. Thus, the legislator himself thought that he would target energy companies, not end-consumers with the tax. As a consequence, the fuel element tax had to be declared null and void because the nation state did not have the competence of article 106 (1) German constitution to impose it as a consumption tax in the first place.

In the central statement of the judgement, the court made it very clear that the German state cannot just `invent` taxes, but has to base every tax that the state is imposing on the German constitution. This verdict potentially has  repercussions for the leeway of discretion of the German state to `invent` energy and climate taxes, like the hotly debated carbon tax. One result of yesterday`s ruling is that such a proposed carbon tax would have to be drafted very carefully to stay within the narrow confines of the German constitution.  


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