Portuguese government backpedals on tax for renewables

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The Portuguese Socialist Party (PS), the leading party of the left-wing coalition supporting the minority government of prime minister Antonio Costa, voted yesterday against the extension of the so-called Contribuição Extraordinária sobre o Sector Energético (CESE) to renewable energy companies.

The inclusion of renewables in the payment of the tax, which was originally conceived only for conventional energy companies, had been preliminarily approved by the Parliament with the vote of all the parties forming the government coalition, including the PS, on Friday.

Members of the PS said in the Parliamentary debate on the matter that the CESE tax, if also applied to renewables, would have hindered the further development of clean energy across Portugal, while cooperation with the RE sectors remains a priority.

The Left Bloc (Bloco de Esquerda), which is also backing the government coalition and was responsible for submitting the proposal to the parliament, has criticized the PS for backpedaling on the deal the government coalition had reached on Friday, claiming that the extension of the tax to the green economy was necessary. This is due to the fact costs for renewable energy incentives are currently being paid only by consumers.

The CESE tax was imposed in 2014 on all conventional energy companies to help reduce the country’s tariff deficit issue. Portugal is aiming to eliminate outstanding tariff deficits created in the past decades by retail electricity tariffs that were set below costs by 2020. The deficit escalated particularly between 2007 and 2008, due to the mismatch between the wholesale electricity price and the real price of power.