EU Court Rules Against Hungary’s CO2 Tax
The European Court of Justice has ruled that Hungary’s tax on CO2 emission permits, introduced in 2023, breaches EU law. The court said the measure undermines incentives for companies to invest in reducing emissions.
The tax was introduced by the outgoing government of Viktor Orban, who recently lost parliamentary elections. It applies to companies that receive a significant share of emission permits free of charge, with the levy set at €36 per tonne of annual emissions.
The European Court of Justice has referred the case back to a court in Veszprem, which had originally sought guidance. “Hungary’s tax on CO2 emission permits appears to be contrary to EU law,” the ruling stated.
The court sided with fertiliser producer Nitrogenmuvek. It found that the Hungarian regulation conflicts with the objectives of the EU’s 2003 Emissions Trading Directive, which is intended to reduce greenhouse gas emissions.
According to the ruling, taxing free permits diminishes their financial value and weakens incentives for companies to cut emissions.
In the past, the Hungarian government has ignored rulings by EU courts. Peter Magyar’s Tiso party has not yet commented on the case.