New state aid rules specifying the conditions under which EU governments are allowed to support businesses for environmental reasons, boost clean energy and phase out support for fossil fuels have been unveiled by the European Commission Tuesday, December 21.
the guidelines seek to align EU state aid rules with the European Green Deal, focusing on support for renewable energies and meeting the bloc’s climate goals.
If an EU government wants to finance a project that is not in line with the EU’s climate targets for 2030 or 2050, “the scales are unlikely to tip in favor of supporting it with aid,” he said. said Margrethe Vestager, EU Head of Competition, who presented the new rules.
The guidelines also include a new section on aid for the closure of coal, peat and oil shale plants to facilitate decarbonisation in the electricity sector, said the EU executive in a statement.
Once officially adopted early next year, the new guidelines will immediately apply to all EU legal texts. EU member states will have until 2024 to align their existing aid schemes with the new requirements.
The guidelines widen the scope of areas exempted from the generally strict EU state aid rules, supporting new energy players, such as small renewable energy producers, a Vestager explained.
Other new areas covered include government support to improve the energy performance of buildings and clean mobility, such as infrastructure for clean electric vehicles, ships and planes.
“A little pragmatism” on gas
However, the new guidelines also inject “a bit of pragmatism” into state aid rules, added the Danish commissioner who named natural gas “a special case because for now it is acting. as a bridge to our path towards more renewable energies “.
âBut a bridge is not a destination, and state aid decisions will reflect hat logic. Our goal is and will remain to gradually reduce our dependence on fossil fuels. And that includes gas, âVestager insisted.
Urged by journalists to elaborate further, the Danish commissioner said a “special clause” would apply to natural gas allowing “member states with the lowest GDP to switch from coal to gas”. Because they kind of need a helping hand to do it.
This comment is likely aimed at EU countries like Poland, Greece and Romania, which rely heavily on coal and are planning investments in gas projects to move it.
The key criteria for fossil gas projects to gain EU state aid approval are whether they are future-proof and ready to accept higher shares of green hydrogen or gas. biogas. They must also prevent a locking effect in polluting energy by demonstrating a clear path to decarbonisation.
âWe can’t have gas with a locking effect,â Vestager said. “We can make the necessary pragmatic exceptions, but this has yet to contribute to our green goal,” she explained.
On nuclear state aid, Vestager said it would continue to be assessed under the 1957 Euratom Treaty, which provides a legal basis for EU support for security and safety projects. nuclear research.
The revised state aid guidelines could, however, play an indirect role for nuclear, “for example when hydrogen is produced with nuclear power,” Vestager said. “And it’s in the guidelines.”
Contracts for difference
Notably, the new state aid guidelines will allow governments to support any clean technology with contracts for difference, which entitles the beneficiary to a payment equal to the difference between a fixed strike price and a reference price. – such as the price of CO2 on the European carbon market.
âFor example, if you are an energy supplier and the market price is lower than that strike price, the state pays you the difference,â Vestager explained. If the market price is higher, the beneficiary then reimburses the difference to the State. “And that ensures stable and predictable income streams,” she said.
Contracts for Difference were first tested in Germany, which launched the program last year as part of its â¬ 7 billion hydrogen strategy. The program is supported by the German industry association BDI, which sees it funding clean technologies in energy-intensive industries like chemicals, cement and steel.
[Edited by Alice Taylor]