Hungarian carbon tax has been judged incompatible with European Union rules, after the European court of justice ruled against the measure in a decision that could have broader implications for national climate policies within the bloc.
The court decision against Hungarian tax
The tax amounts to 36 euros ($42) per ton of annual emissions produced by each company. The European Court of Justice sent the case back to the Veszprém High Court in Hungary, which initially referred it to the ECJ.
“The Hungarian tax on CO2 emission allowances appears to be contrary to EU law, which it is for the national court to verify,” the ECJ ruling said.
Taking side with Hungarian fertiliser maker Nitrogénművek, the Court of Justice said that Budapest’s policy goes against the goals of the EU’s 2003 emissions trading directive, which is designed to reduce greenhouse gas emissions across the bloc. It warned that a tax on free emission permits deprives those permits of much of their financial value and removes the incentives that are meant to stimulate companies to lower their emissions.
Hungarian conflict with EU regulations
Orban’s government challenged ECJ rulings on other matters in the past and the constitutional court of Hungary rejected a separate complaint against the decree in 2024.
The ruling forces Hungarian authorities to reconsider the structure of the carbon tax. The government will now need to align any future measures with EU regulations to avoid further legal conflicts.
There was no immediate comment from the TISZA party of Peter Magyar, who has pledged far-reaching reforms and said he hopes his cabinet can be sworn in by mid-May.
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