Brussels, 29/09/2006 (Agence Europe) - On Thursday, the European Commission opened a formal investigation to examine whether Danish plans to grant CO2 tax exemptions to companies covered by the EU's Emissions Trading Scheme (EU ETS) are compatible with EC Treaty state aid rules. The Danish government wants to introduce an exemption from the national CO2 tax on fuel consumption for industrial activities covered by the EU ETS, granting full exemption to energy-intensive businesses covered by the EU ETS, and a reduction of up to 50% of the EU minimum tax levels to businesses covered by the EU ETS which are not energy-intensive. The government wants to eliminate double regulation of CO2 emissions, by taxes and emission quotas, arguing that double regulation will not lead to any further CO2 reduction, but only increase the firms' costs, creating a double burden. The Commission is concerned that the measure might distort competition by increasing tax differentiation in an area where the EU has harmonised taxes in order to create a level playing field between companies. Minimum rates of energy taxes are set out in the Energy Tax Directive (2003/96/EC). In Denmark, the CO2 tax is levied in order to comply with these minimum rates. With the proposed CO2 tax exemptions, the energy tax paid by the firms concerned would be below the minimum rates. Companies covered by the EU ETS must surrender allowances for their greenhouse gas emissions. The companies either get their allowances for free at the beginning of each trading period or buy them in auctions and/or on the market.