New EU Rules On Energy Projects Focus on Flexibility, Climate Change

The European Commission has endorsed the new Climate, Environmental Protection and Energy State Aid Guidelines (CEEAG).  to ensure that its state aid rules play their full role in supporting the European Green Deal, according to a recent announcement.

Back in February, the European Commission (the executive branch of the European Union) organised a conference about how competition policy can best contribute to the Green Deal. Competition rules are not in the lead when it comes to fighting climate change, but there was a broad consensus that they play a very important supporting role.

Margrethe Vestager, Executive Vice President of the European Commission for A Europe Fit for the Digital Age, states that the new Guidelines are one aspect of what EU Competition policy is doing to support the Green Deal. She highlights its following features:

• Member States will be able to support any technology delivering carbon reductions, using flexible tools like ‘contracts for difference’. These contracts fix a “strike price”. For example, if you are an energy provider, and the market price is below that 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.
• Maximum aid ceilings are largely done away with. So now State aid can cover the full additional cost of a greener investment, over a less green alternative.
• The focus of the new Guidelines is of course still on competition, innovation and value for money.
• The Guidelines’ scope has been widened to include State aid for pollution reduction, circular economy and biodiversity in order to limit many other forms of pollution and waste that continue to harm the climate.
• New dedicated sections have been added for clean mobility and energy efficiency in buildings. Those two sectors jointly account for more than half of the EU’s total greenhouse gas emissions.
• Support will be enabled for clean vehicles, including vessels and aircrafts, and the infrastructure to recharge and refuel them.
• Whenever a fossil fuel-dependant project is not compatible with EU’s 2030 and 2050 climate targets, the balance is not likely to tip in favour of supporting it with aid. Natural gas is a special case, because for now it acts as a bridge on our path to more renewables.
• For energy-intensive users, decarbonising and electrifying the production process can be an additional challenge, if they also have to pay the full price of electricity levies. The Guidelines therefore allow a reduction in levies put in place by the Member States to finance green investments.

“We will also expand the scope of our General Block Exemption Regulation. This way, Member States can mobilise more aid for green projects, without the need for prior approval from the Commission. In 2019, over 95% of new State aid measures were already exempted from notification and, with the proposed targeted amendments, we expect this share to increase further,” said Vestager.

“Our focus is on what is practical, and on what can work. Because what matters is not the number of boxes we tick; but delivering on our promise to future generations – and competition policy will continue to play its role in achieving that,” she concluded.