The College of Commissioners approved, on Tuesday 21 December, the new Guidelines on State aid for Climate, Environmental Protection and Energy (‘CEEAG’).
They will be formally adopted in January 2022 and will be applicable from that moment on (see EUROPE 12841/1).
Margrethe Vestager, Executive Vice-President for Competition Policy, told the press: “These Guidelines are a major step to ensuring that our State aid rules play their full role in supporting the European Green Deal”. She recalled that the fight against climate change, pollution and biodiversity loss is “our promise to future generations”.
The CEEAG, the Executive Vice-President continued, “build on the possibilities under the current Guidelines to incentivise renewables in a cost-effective way”.
And they open new doors.
This will allow Member States to support any technology delivering carbon reductions, using flexible tools like ‘Carbon Contracts for Difference’. These contracts fix a ‘strike price’. For example, if you are an energy provider and the market price is lower than this strike price, the State pays the difference. If the market price is above the strike price, you may have to pay the difference to the State. This ensures stable and predictable revenue streams, Ms Vestager said.
State aid now covers the full extra cost of a greener investment compared to a less environmentally friendly alternative.
The Guidelines support new actors, like Renewable Energy Communities.
With competitive bidding as the default mechanism for awarding contracts and setting subsidies, the Guidelines keep competition distortions to a minimum, Ms Vestager said.
The aim is to have “profitable investments”, said Ms Vestager when answering the press. But the Commission is proposing exemptions, notably for Renewable Energy Communities, which will not have to go through a tender process if they wish to implement 6 megawatts (or 18 megawatts in the case of wind power). Another exception is that if there are expectations of cost differences of more than 10%, then there is no need to have a competition between different technologies. The supply of wind energy is not the same everywhere in Europe, there will be differences. Hence this call for competition to make “things work”, the Vice-President claimed.
By requiring public authorities to identify the relative costs of different measures to decrease emissions, the Guidelines shine a light on the most cost-effective approach.
In addition, by requiring public consultations for the largest subsidy schemes, the Guidelines make the process more inclusive and more transparent.
Scope of Guidelines. The Commission is widening the scope to include all areas and technologies that contribute to ambitious climate and environmental objectives. The new Guidelines extend to State aid for pollution reduction, circular economy and biodiversity.
They include new dedicated sections for clean mobility and energy efficiency in buildings.
By enabling support for clean vehicles, including vessels and aircraft, and the infrastructure to recharge and refuel them, “we give a boost to the decarbonisation across the whole transport value chain”, the Executive Vice-President stressed.
Fossil fuels. The phasing out of support to fossil fuels is advocated for by the Commission. State aid always requires a balance between the benefits of the funded activity and the distortions it may cause. The new Guidelines apply this principle when accounting for environmental harm, for example from fossil fuels. Whenever a project is not compatible with the EU’s climate targets, “the balance not likely to tip in favour of supporting it with aid”, Ms Vestager conceded.
The Guidelines include a new section on aid for the closure of coal, peat and oil shale production facilities, to promote decarbonisation in the electricity sector.
Natural gas is a special case, “because it is currently used as a bridge on our path to more renewables”, Ms Vestager said. “Our goal is, and will remain, phasing out reliance on fossil fuels – that includes gas”. And less reliance on imported fossil fuels “ will also help us avoid the kinds of energy price peaks that we are currently facing”, she explained.
Answering questions from the press about support for gas, Ms Vestager pointed out that a special clause allows Member States with a low GDP to make a transition from coal to gas. “They need a helping hand to do this”, she said.
In addition, such support for gas could be approved if the measures are climate neutral (if combined with carbon sequestration systems or if the infrastructure is ready for hydrogen), Ms Vestager explained.
Finally, for energy-intensive users, decarbonising and electrifying the production process may be an additional challenge, if they also have to pay the full price of electricity levies.
The Guidelines therefore allow for a reduction in the levies put in place by Member States to finance green investments.
Once they are formally adopted early next year, the Guidelines will apply to all decisions that the Commission takes.
“We recognise that existing schemes need time to adapt to these new rules. So Member States have two years to do so”, she concluded.
Link to the guidelines: https://bit.ly/33H4Lcd (Original version in French by Lionel Changeur)