Market transformation through credits on corporate income taxes
Luigi Meli CECED Director General
Bratislava, 24 October 2006
Who is CECED?
CECED Members
14 Direct Members Arçelik Bosch Siemens Candy De’Longhi Electrolux Fagor-Brandt Gorenje Indesit Company Liebherr Miele Philips Saeco SEB Whirlpool 24 national associations
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The sector’s profile
Direct and indirect jobs Revenue Investments over the last 10 years, mainly eco-innovation Average net profit:
Product platform life: Product average working life: Long term price trends, in nominal terms 1995/2006 1999/2004
half a million 40 billion €
10 billion € < 2% 5-7 years 10-13 years flat
Energy efficiency up to +45% Actual reduction of energy consumption -15% Investments +25% Net profits -25%
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Materials cost increase is hampering sector profitability
100% 90% 80% 70% 60%
materials and components services labour
50% 40%
depreciation
30% 20% 10% 0%
taxes margins
1999 2003 2006 (estimate)
Source: CECED based on data from Prometeia
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Distribution in energy label classes: cold appliances
60
Today only four (+1) classes are used
1992 1994 1996 1998 2000 2002 2004
50 1995 1997 40
Models (%)
1999 2001 30 2003
20
10
0 A++ A+ A B C D E F G
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Distribution in energy label classes: washing machines
100,0%
90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0%
Today only one class (+1) is used
1996 1997 1998 1999
2000
2001 2002 2003 2004
A B C D E
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Lessons learned
In order to be successful, an ambitious energy savings policy for our sector must be based upon three elements:
Mandatory energy labelling Development of energy efficient technology; and Measures to ensure better diffusion of state-of-the-art
technology to turn energy efficiency into energy savings.
We have developed the products, but their uptake is too slow. This prevents the realisation of the potential environmental benefits and endangers the competitiveness of our industry.
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Transforming energy efficiency into energy savings
We need new ideas to tackle old problems
There is no panacea! Policy will have to consist of a combination of different measures. But there are right choices and wrong choices to be made in our view.
We support ambitious energy savings targets, the development of labelling and eco-design initiatives, and the most appropriate tool, for our industry to contribute to this, are tax credits to the manufacturers for every supplementary highly energy efficient product that has been sold in a given year.
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Member States cannot skip tax credit from their agenda
USA introduced tax credit in the Energy Policy Act (2005) for some household appliances.
• it applies to US-produced clothes washers, refrigerators and dishwashers that exceed mandatory standards by various amounts, essentially the levels of Energy Star programme • credits vary from $36-175 per product and can be earned between 2006-07 with a cap of $75m per manufacturer • total cost of legislation assumed to be around $200-250 million with societal benefits in reduced consumer energy bills of at least $1bn
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Member States cannot skip tax credit from their agenda
USA introduced tax credit in the Energy Policy Act (2005) for some household appliances.
Incoming 11th five-year plan calls to develop a preferential treatment to those enterprises who made products with low energy consumption and study the feasibility to actualize other preferential policies
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Member States cannot skip tax credit from their agenda
China is preparing a similar approach.
Addressing this point is fundamental to discuss about the future of manufacturing in Europe, industry competitiveness and achievement of environmental goals.
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EU Action Plan goes in the right direction
Fiscal policies are one of the Action Plan priorities and manufacturer tax credits are one of the options.
Commissioner Piebalgs’ declaration (from Eupolitix) ….. “We think tax policy has a huge potential, what I am asking is, how can we use tax policy for the goal of energy efficiency,” he said. “It is not about a common tax policy by the backdoor… my wish is to use tax incentives to improve energy efficiency in the EU.” “We are looking for incentives not just taxes on consumption.” Piebalgs supports policies that by taxing pollution and giving fiscal breaks to clean production or products Europe can help cut energy consumption by 20 per cent by 2020. ….
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EU Action Plan goes in the right direction
the Commission will consider in 2007 the costs and benefits of using tax credits as incentives for enterprises to promote the increased production of certified energy-efficient appliances and equipment, for example through the use of the EU labelling scheme (i.e. tax breaks for the manufacturer of highly efficient products).
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Can Europe afford to disregard this possibility?
The Green Paper referred to our sector as “world leader”. But how long will we remain world leaders?
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