CMS secures landmark victory before the CJEU in Hungary CO2 tax case
CMS Budapest has successfully represented Nitrogénművek Vegyipari Zrt., Hungary’s largest fertiliser producer, in a landmark case before the Court of Justice of the European Union. The Court confirmed that a Hungarian tax on CO₂ emission allowances was incompatible with EU law, a ruling with significant implications for the protection of the EU Emissions Trading System (EU ETS) and the industries it supports.
In July 2023, the Hungarian Government adopted a tax of EUR 36 per tonne of CO₂ on operators receiving significant free emissions allowances under the EU ETS. The measure applied retroactively to all emissions produced from 1 January 2023.
CMS was instructed to analyse the new tax rule and identify all available legal remedies. The highly technical nature of the case required a strong combination of tax and litigation expertise.
CMS successfully established that the tax undermined the purpose of free emissions allowances, which are intended to help energy-intensive industries remain competitive while transitioning to greener operations. The Court ultimately ruled in favour of Nitrogénművek, holding that Hungary’s tax was incompatible with EU law.
The CMS team was led by Zsolt Okányi and included David Zlati, Peter Bibók and Kira Farkas (Litigation); and Eszter Kálmán (Tax).
