Wind power plants and photovoltaic (PV) plants might affect the landscape. To what extent is in the eye of the beholder.
In mid-2021, the legislature of the Austrian province Burgenland introduced a tax that is intended to compensate for the impairment of the landscape by new wind power and new PV plants.
On 7 April 2022, Burgenland's legislature adopted the so-called "Renewable Energies Acceleration Act" (Bgld EbBG).
One cornerstone of the Bgld EbBG is the extension of the tax to wind power and PV plants that have already been erected or for which permitting procedures are still pending (existing plants). Thus, not only new plants but also existing plants should be subject to the tax in future, despite the fact that, for those existing plants, annual compensation fees for the impairment of the landscape have usually been agreed under private law between the operators and the municipalities where the plants are located.
Since the Bgld EbBG affects specific federal tax law matters, the federal government can formally object to the law within a certain period of time. If the federal government does not object, the Bgld EbBG will enter into force.
The upcoming extension of tax liability raises legal questions under constitutional law.
Current and upcoming legal framework
At present, the tax does not apply to wind power and PV plants that have already been erected or for which permitting procedures are still pending.
Existing plants are usually subject to so-called "cooperation agreements" under private law between the operator and the respective municipality. Those agreements also include annual compensation fees for certain adverse effects, such as the impairment of the landscape. In general, these contracts are long-lasting. They are concluded for the duration of the operation of the plant and end with its full dismantling. Termination rights are usually not provided.
Burgenland's Spatial Planning Act (Bgld RPG) stipulates that such compensation agreements regarding the impairment of the landscape cannot be concluded for new plants subject to the tax.
On the other hand, the Bgld RPG does not interfere with ongoing contracts for existing plants, nor does it prevent the conclusion of new or additional contracts for existing plants.
According to the explanatory remarks of Burgenland's legislature from 2021, those provisions should avoid double burdens for operators of existing plants. Either the plant is subject to the tax or to contractually agreed compensation.
The now-adopted Bgld EbBG obviously contravenes this aim:
- All wind power and PV plants (not only new but also existing4 plants) will be subject to the tax.
- For existing plants, the tax will be gradually increased on a linear basis for a period of four years. Thereafter, the full tax must also be paid for existing plants.
- Ongoing contracts for existing plants are not interfered with. Therefore, the agreed compensation fees for the impairment of the landscape are still to be paid to the respective municipality.
- However, new wind power and PV plants are only subject to the tax. Agreements regarding compensation fees cannot be concluded for new plants.
Thus, operators of existing plants will be burdened at least twice as much as operators of new plants, as they must pay the tax as well as the agreed compensation fees.
Especially given that operators of existing plants have been contributing to the energy turnaround for years, if not decades, can this be constitutional?
Are these double burdens for existing plants constitutional?
The legislature – whether at the provincial or federal level – is bound by the constitutionally guaranteed principle of equality. Unless there are objective reasons, equal matters are to be treated equally and unequal matters unequally.
These double burdens with which operators of existing plants will be faced lead to unequal treatment compared with operators of new plants that cannot be objectively justified.
As already mentioned above, in 2021 Burgenland's legislature highlighted the aim to avoid double burdens for existing plants due to agreed compensation fees on the one side and the tax on the other. Existing plants were therefore not subject to the tax. Now, the legislature is seeking the opposite, without any further reason.
Moreover, these double burdens are not compatible with the public interest in the expansion of renewable energies, which the legislature explicitly emphasises in its explanatory remarks.
Also, the amount of the tax does not take into account the agreed compensation fees that operators of existing plants pay to the municipalities.
Finally, contrary to the legislature's opinion, the contractual agreements between operators of existing plants and municipalities do not end within the next few years. Since there are usually no termination rights, those contracts are rather long-lasting.
Therefore, there is no objective reason why operators of existing plants should pay twice for the impairment of the landscape. The now-adopted Bgld EbBG lacks the constitutionally required distinction between new wind power and PV plants and existing plants. Therefore, the extension of the tax violates the principle of equality.
As already stated, the Austrian Financial Constitution law grants the federal government's right to object to the Bgld EbBG within a certain period of time.
Even if the Bgld EbBG enters into force it is likely that the (extended) tax will be challenged before the Constitutional Court.
By Christian Holzer, Associate, Schoenherr