Energy, Latvia, Taxation

The abolition of the MPC system means that “we will not be seeing it in our bills anymore”, Nemiro said. To cover these costs, the government plans not only to spend budget funds but also to make “polluters pay” in line with the European Union’s (EU) rules. The mechanism for the new system has yet to be worked out, but the plan is to shift these costs to the biggest polluters in the transport and energy sectors.

In this way, the polluters will be encouraged to become more energy efficient and reduce their CO2 emissions. The Economics Ministry plans to submit a report on this and other proposals by mid-2020 when the government is expected to discuss other possible tax measures. Discussions are being planned also with representatives of the respective industries, Nemiro said.

If the new proposals receive the necessary support, the MPC will be abolished on January 1, 2021, Nemiro said, adding that the Finance Ministry has yet to estimate the financial benefit from the compensatory mechanisms.

Apart from the Finance Ministry, the Environmental Protection and Regional Development Ministry and the Transport Ministry are also involved in tackling the issue.

This summer, the government approved the measures proposed by Economics Ministry for dealing with the MPC problem, which include stricter requirements to MPC recipients, limited support and reduced electricity costs for consumers.