New rules aid 20-20-20 targets

Professor Robert Lee | 10 years ago

New rules on public funding for projects in the field of environmental protection and energyhave been announced by the European Commission, which aim to facilitate the meeting of 2020 climate targets by Member States. These targets, known as the “20-20-20” targets, set three key objectives for 2020:

  • A 20% reduction in EU greenhouse gas emissions from 1990 levels;
  • Raising the share of EU energy consumption produced from renewable resources to 20%;
  • A 20% improvement in the EU’s energy efficiency.

The new guidelines hope also to smooth out potential the market distortions caused by present subsidy of renewable energy but advocate a gradual move to more market-based support for renewables. In particular the guidelines address aid for energy infrastructure and generating capacity. In the light of recent events in the Ukraine, there is a strong emphasis on building up security of supply. The emphasis here seeks to plug a gap since earlier guidelinesissued in 2008 did not include compatibility criteria for energy infrastructure and security, leaving room for doubt as to the application of Article 107 of the TFEU and the general rules on state aid contained therein.

Under the new guidelines, Member States can support energy intensive companies exposed to international competition by relieving these from charges levied for the support of renewables. Although the recent sharp growth of renewables in the EU has furthered environmental objectives, particularly in relation to carbon reduction, it has done so on the back of subsidy from the EU taxpayer. This has also caused serious market distortions and increasing costs to energy consumers. In a statement Joaquin Almunia, Commission VP for Competition Policysaid:

It is time for renewables to join the market. The new guidelines provide a framework for designing more efficient public support measures that reflect market conditions, in a gradual and pragmatic way. Europe should meet its ambitious energy and climate targets at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

Among the measures in the guidelines are the following:

Support for cross-border energy – This includes the new criteria energy infrastructure support mentioned above. It covers projects that improve cross-border energy flows and support for energy infrastructure in less developed regions of Europe.

Gradual introduction of market based mechanisms – The new guidelines promise the gradual introduction of competitive bidding processes for public support for renewables, subject to national circumstances, beginning with pilot procedures in 2015 and 2016.

Feed-in premiums – These are planned to replace feed in tariffs to subject renewable energy sources to better market signals. However, small installations can continue to be supported by feed-in tariffs and any new rules will not apply to schemes already put in place under the existing rules.

Promoting competitiveness – The guidelines envisage the reduction of the burden on energy intensive industries of charges levied to support renewable energy, thereby reducing energy bills for such industries. This is aimed to increase the international competitiveness of such industries. The guidelines make provision for this reduction for certain chosen sectors across the EU as a whole but some discretion is also given to Member States to reduce the burden on energy intensive companies in other sectors.

Aid to secure sufficient electricity generation – Member States suffering inadequate generation problems are to be allowed to introduce capacity mechanisms to encourage the construction of new generation facilities or prevent the closure of existing plants. Aid can also be used or to reward consumers for electricity consumption reduction at peak times.

Amendment to the Block Exemption – This is to be amended to simply state aid measures for environmental and energy purposes. A Revision of the Block Exemption is already under way. This move will negate the need for Commission approval in cases included within the revised Exemption. The changes are likely to be wide ranging and will include district heating schemes, energy efficiency in buildings and even contaminated land remediation.

The Commission issued the new guidelines on 9 April 2014. They will take effect from 1 July 2014 and will last until the end of 2020 in line with the 20/20/20 targets.

About the author

Professor Robert Lee

ERIC Director and Head of Birmingham Law School, Professor Robert Lee was co-director of the publicly funded Centre for Business Relationships, Accountability, Sustainability and Society at Cardiff University (BRASS). He is an expert on regulation, including environmental regulation and regulation of biotechnology and biomedicine. He previously worked for two top 10 UK law firms, and remains a professional-development consultant to one of the largest law firms in Europe, working on pan-European delivery of legal services.