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'Ending Fossil Fuel Subsidies in Europe' Newsletter No.4 - December-January 2017

'Ending Fossil Fuel Subsidies in Europe' Newsletter No.4 - December-January 2017:

A monthly update on policy development, campaigning and communications

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CAN EUROPE'S LATEST TAKE ON THE ISSUE

 

What’s in the EU’s ‘Clean Energy for all’ package?

By Maeve McLynn, Markus Trilling & Joanna Flisowska

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Quote from the European Commission's ‘Accelerating Clean Energy Innovation Communication’:
“The time is ripe for change. Current low oil and gas prices provide a window of opportunity for phasing out fossil fuel subsidies without adverse effects on social welfare” – p.5
Quote from the Commission's Energy Prices and Costs Report:
“The recent relative fall in energy prices should make it easier for governments to remove tax exemptions and other energy demand subsidies”
“Fossil-fuels subsidies are particularly problematic, as they disadvantage clean energy and hamper the transition to a low-carbon economy.” p.17

 

1. Overview of related reports & publications

On November 30th, the European Commission published its sizable 'Clean Energy for All Europeans’ Package, including eleven legislative proposals on the medium to long-term fate of the European energy sector. Lost in the flurry of activity surrounding big files, such as those on renewable energy and energy efficiency, were some smaller pieces of the package which went under the radar of European stakeholders. And quite conveniently it would seem.
 
    Summary of EU reports

A number of pieces published by the European Commission on November expose the persistence of fossil fuel subsidies and the obstructions they cause to Europe’s clean energy transition. Below, we lay out these various files which bring in the financial and market elements to Europe’s energy sector, which unlock the potential for a more ambitious pursuit of renewable energy and energy efficiency:

  • The European Commission’s report on energy prices & costs
  • The Commission Communication on accelerating clean energy innovation
  • The Communication entitled "Clean Energy for All Europeans" 
  • The Annex that accompanies that Communication - "Action to boost the clean energy transition"

The various papers published by the European Commission clearly point out a serious problem that we face: while the European Union wants to be a leader in the renewable energy revolution, fossil fuel subsidies are still persistent across the EU and its Member States. The inconvenient truth for European decision makers is that these subsidies distort the energy market by primarily benefiting a handful of energy-intensive and large polluting industry, and that public money is still being used to obstruct the EU’s  transition to clean, renewable-based energy.
 
The energy prices & costs report re-affirms its findings from research conducted in 2014 that approximately €17.2billion was given as direct fossil fuel subsidies to electricity and heating in 2012, support for fossil fuels for transport were separately estimated at €24.7 billion. If ‘external costs’ like air pollution and health costs of fossil fuel combustion are counted in, fossil-fuel subsidies rise to €300 billion a year in the EU (Energy prices and costs in Europe {SWD(2016) 420 final}, page 17). This compares to twice the total annual EU budget.
 
For civil society and environmental organisations the admission of the harmful and egregious nature of fossil fuel subsidies has been obvious for years. But the recent assertions made by the European Commission mark an important indication that policy makers and political actors are finally waking up to the detrimental nature of fossil fuel subsidies. The reports suggest that these subsidies should no longer be an elusive and hidden issue dodged by decision-makers and political actors across the EU, but that they should be front and centre of the debate on transforming Europe’s economy to be 100% renewable and fully energy efficient.
 
The publications acknowledge the significant distortive impact fossil fuel subsidies have on markets, prices and the clean energy transition, yet the European Commission itself went surprisingly quiet on the topic when promoting its ‘Clean Energy Package’. While the Commission claims that “The EU is committed to removing fossil fuel and environmentally harmful subsidies”, the responsibility to act is tacitly placed on Member States. This stems from the assumption that much of the necessary effort falls under Member State competences rather than those of core European Union institutions.
 
   Our expectations of the EU

It is true that government led action is necessary, but EU institutions including the European Commission also need to be torch bearers for phasing out fossil fuel subsidies. Through its policies and processes – such as the Emissions Trading Scheme, capacity mechanisms and state aid guidelines, and funding instruments – the European Commission should put itself forward for greater ambition and action to ensure that no public money in the EU is going to polluting industry. Similarly the EU budget with its European infrastructure and regional development funds, as well as the much lauded European Fund for Strategic Investments should be at the forefront of the clean energy transition, pledging to halt any current or potential financial support for the fossil fuel sector.
 
The problem of fossil fuel subsidies is laid bare, but so too are the opportunities to phase them out. European countries should take advantage of the low energy prices, which allow them to remove harmful subsidies without incurring any social or economic consequences for their citizens. Alongside these measures, governments should  make use of European policies and financial instruments to prioritise clean energy alternatives.

 
2. Capacity Payments – what is behind the techy term?

Adding more reading to our long list of papers is the Communication on Energy Market Design which was also included in the so-called “Winter package”. This paper includes provisions concerning capacity payments. Capacity payments are support schemes that remunerate generation availability, in addition to any revenue already gained from selling generated electricity on the market, they have been already introduced in some EU countries eg. UK and France.

Capacity payments are especially critical to deal with fluctuating renewable power — to step in when the wind stops blowing or the sun isn’t shining. These plants often have to be subsidized, and in many cases are coal- or gas-fired power plants. Brussels plans to allow EU countries to continue using these payments, but only as a last resort.

The new rules on capacity payments will complement existing state aid guidelines by creating a European framework and imposing concrete rules. Draft Electricity Market regulation includes principles for capacity mechanisms i.a. :

  • Member States shall monitor resource adequacy within their territory based on the European resource adequacy assessment, and also taking into account storage, demand-side and energy efficiency measures;
  • If the European resource adequacy assessment has not identified a resource adequacy concern, Member States shall not introduce capacity mechanisms;
  • Member States willing to introduce a capacity mechanism shall consult on the proposed mechanism at least with its electrically connected neighbouring Member States.
  • Capacity mechanisms must be open to participation of all resources, including storage and demand side management. However generation capacity emitting more than 550 gr CO2/kWh cannot be committed in capacity mechanisms 5 years after the regulation comes into force. And new capacities exceeding 550 gr CO2/kWh standard would be ineligible as well.

However, these so called Emission Performance Standards still allow for fossil fuel based backup capacity, thus the Commission “proposes to keep the gate open for more money to be poured into coal power plants,” said Jean-François Fauconnier from Climate Action Network. “With such proposals the EU would miss a historic opportunity to revamp market rules which until now favor large, polluting fossil fuel and nuclear power plants.”


3. Next Steps

Following this big package of proposals and reports, CAN Europe is preparing a number of briefings and position papers surrounding those that will be negotiated with Members of the European Parliament and EU governments. That includes issues such as capacity mechanisms.
 
We will do specific follow up with the European Commission on the avenues for changing the game on subsidies that have been highlighted in the various publications:

  • Energy governance and reporting required by Member States in their National Energy & Climate Plans (NECPs). Part of this planning and monitoring mechanism member states have to explain the financing behind their plans, i.e. how much public funds (national and EU) they are going to invest on the various sectors and technologies. And they also should report on the phase-out of fossil fuel subsidies.
  • Taxation: whether the reference to evaluating the EU’s framework on energy taxation will be plausible opportunity to influence Member States on subsidies through taxation.
  • Reviewing State Aid guidelines as a means to stimulate innovation in renewable energy technologies in EU Member States.


4. Conclusion

The benefits of phasing out fossil fuel subsidies are manifold. It will facilitate the allocation of more support to research and innovation in clean technologies such as energy efficiency, renewable energy and storage. It will also contribute to enhancing European and international climate action, healthier and cleaner local environments, and easing government budgets.
 
With these two publications, the Commission has put the writing on the wall, clearly indicating that the convenient silence surrounding fossil fuel subsidies needs to be broken. The EU and its leaders cannot shy away from the evidence provided by its own institutions. Fossil fuel subsidies need to become a thing of the past if we are to achieve a meaningful energy transition and avoid dangerous climate change. 


 

Climate action in the EU budget

by Markus Trilling

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What should the EU do to bring the EU budget’s climate action back on track:

  • In its 'mid-term review' of the EU budget from September 2016 the European Commission  admits that 'more efforts are needed' to achieve the 20% Climate Action target, but the Commission does not propose concrete steps in this regard. The Commission should develop action plans for the different funds on how to increase and improve climate spending;
  • The European Commission should directly increase climate action in the funds it manages directly, e.g. Connecting Europe Facility. But more important is that Member States bring their spending plans, the so called Operational Programmes, in line with EU climate targets and the Paris Agreement. There are still fossil fuel subsidies in the EU budget and too little resources are given to effectively catalyze the transition away from fossil fuels towards 100% renewables and fully energy efficient economies. This need to change.
  • The European Commission should immediately improve its so called 'climate action tracking' methodology to get a more realistic picture about the volume and actual impact of climate action spending of the EU budget;
  • There needs to be more scrutiny about what is accounted for as adaptation: large parts of the funding to European farmers, both direct payments and under rural development programs, are labelled climate adaptation whereas its positive environmental impact is not proven.

There is a demand for climate adaptation and mitigation measures where EU money is essential for success:

Commissioner Canete says that the EU needs additional EUR 177 billion per year in investments from 2021 onward to meet its 2030 climate and energy targets. The EU budget has to contribute significantly to these investment needs. The European Commission's centrally managed funds (Connecting Europe Facility) should stop funding fossil fuel infrastructure and focus on electricity interconnection between countries, while Regional Development Funding should massively increase resources for energy efficiency measures, renewable energy role-out and SMART demand management. These areas are currently dramatically underfunded: on average cohesion countries spend only 7% of EU funds on the clean energy transition. 

The EU cannot maintain its aspirations to being a climate mitigation leader if they fall short on their own spending target:

The Paris Agreement requires financial flows to be made consistent with zero carbon development. This requires the EU to not only meet its climate spending target, but the whole EU budget has to be 100 % climate proof as required by the Paris Agreement.

EU DEVELOPMENTS

 

FOSSIL FUEL SUBSIDIES AND THE 'CLEAN ENERGY FOR ALL EUROPEANS' PACKAGE

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The European Commission’s own press release about the publication of the ‘Clean Energy for All Europeans’ package, and its the press release about guidance on capacity mechanisms.

 

Media coverage

- SAT Press News: Polish power rep: Commission’s vision of the electricity market is ‘slightly utopian’

- Financial Times (letter by Tara Connolly, Greenpeace European Unit): Coal plants could be subsidised for next decade

- ACTMedia Romanian News Agency: EU unveils Winter Package of power market reforms

- EuroNews: Europe's power market reform a boon for struggling utilities 

- Politico: Power to the People (and to Brussels)

- New Europe: EU Commission package targets clean energy transition
 
- EurActiv: Commission defends new energy rules and climate ambition

 
- EurActiv: EU unveils Winter Package of power market reforms

- Climate Home: EU warns Poland against ‘backdoor subsidies’ for coal

Ahead of the publication:

- The Parliament Magazine: Campaigners unimpressed with Commission's winter energy package 
"Campaigners have said that the winter energy package the Commission will unveil this week "falls well short" of what is needed to fight climate change."

 
- EurActiv: EU throws in the towel over national energy support schemes
"EU member states have pressed ahead with a variety of schemes to remunerate energy generators for keeping power plants on stand-by, despite warnings from Brussels. It now seems certain that such “capacity mechanisms” will remain a fact of life, at least for the foreseeable future."

 

NGO reactions

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- CAN Europe: Lacklustre Commission energy package inconsistent with Paris Agreement

- Transport & Environment: Commission favours unproven biofuels over clean electricity for transport

- WWF European Policy Office: Commission’s clean energy package still too dirty 

- Friends of the Earth Europe: Beacons of hope in gloomy winter package

- Greenpeace EU Unit: EU lifeline to coal could derail renewable energy transition 

- European Environmental Bureau: EU on thin ice with Winter Package 

- E3G: EU Clean Energy Package “Politically Cautious” 


EU BUDGET

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According to the European Court of Auditors talking about climate mainstreaming in their article 'EU climate action: serious risk that 20 % spending target will not be met' : "...there is a serious risk that the EU’s target of spending at least one euro in every five of the EU budget on climate action between 2014 and 2020 will not be met. While progress has been made, the auditors warn that more effort is needed to ensure a “real shift” towards climate action."

- PublicFinance International: Auditors warn EU spending on climate change could undershoot target

<= Read CAN Europe’s take on climate action in the EU budget in the 'CAN EUROPE'S LATEST TAKE ON THE ISSUE'.


OTHER EU DEVELOPMENTS

EU requires pension funds to assess climate change risks

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- Politico: 'EFSI  — COURT OF AUDITORS CRITICAL OF INVESTMENT EXPANSION: The EU’s auditors say the Commission moved too soon to expand its EIB-backed investment plan because they have not collected enough evidence on whether it is working. Read the report here. The Commission told Playbook it has incorporated criticisms, revamping plans expected on November 30. It wants the EIB to be more transparent about how it chooses projects to increase the geographic spread of funded projects and has won broad backing from the French national assembly, Unicredit and its own independent auditors E&Y. Commission Vice President Jyrki Katainen said “It is satisfying that independent evaluators agree with our approach." '

Here is the new EC communication on EFSI evaluation, published 29 November 2016.

 

NATIONAL DEVELOPMENTS

 

ON THE BRIGHT SIDE...

- Clean Energy Wire : “No funding of fossil fuel projects”

"The German government no longer supports the new construction or overhaul of already decommissioned coal plants via development finance instruments of the World Bank, it said in an answer to a parliamentary inquiry of the Left Party."

... BUT ON THE DOWNSIDE ...

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- Climate Home: Spain’s hidden €1bn subsidy to coal, gas power plants

- Telegraph: Old coal beats new gas for subsidy cash to keep the lights on 

- Independent.ie : Energy watchdog agrees €12.8m funding for gas filling stations
"The energy regulator has approved funding for Gas Networks Ireland (GNI) to roll out compressed natural gas (CNG) filling stations across the country."

CSO CAMPAIGNS & ADVOCACY

 

!!! KICK-OFF OF EUROPEAN FOSSIL FUEL SUBSIDIES AWARDS ON FEBRUARY 1st !!!

 

award_icon.pngNominate the worst public financial support to fossil fuels in your country!

 

CAN Europe will be launching the first European Fossil Fuel Subsidies Awards on the 1st of February to expose and shame the worst subsidies that keep fossil fuels alive.

The aim of the awards is to:

  1. advance the awareness, knowledge and use of the concept of fossil fuel subsidies in Europe and its various manifestations at the national and international level by making it a less abstract and more tangible concept;
  2. support the national and international visibility of national CSO campaigns by offering them a platform to communicate their work on this issue to larger audiences.

The public nomination, open to all, will start on the 1st of February and run for a month. Anybody, through a simple form on our website, will be able to nominate the fossil fuel subsidy(ies) they consider the worst in their country. Following the Jury’s short-listing of the nominations we receive, the public awards vote will be take place online to select which nominated subsidies should receive the awards. This will take place from April to early May and be followed by a grand awards ceremony at the end of May.

Keep an eye on our website for further information coming very soon!

 

For an overview of the main national fossil fuel subsidies in Europe, click on the following map below (which you can also find on our website):

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REPORTS

(to open a report, click on the related image)

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UPCOMING EVENTS

 

Click on the calendar image to view events and add them to your calendar:

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UPDATED WEBSITE

 

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The website's table of contents with direct links to the different sections:

 

       
  euro-white-icon-in-form-of-F.png   Fossil fuel subsidies
  ic_shuffle_white_48dp_2x.png   Avenues for change
  ic_description_white_48dp_2x.png   Publications
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Resources

Data

NGO publications

Visuals

Media

  ic_event_white_48dp_2x.png   Events
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Contact

       

  


 

BUILDING A COMMON NARRATIVE 

 

The voice against fossil fuel subsidies has internationally grown stronger the last couple of years - both among civil society and world leaders - but it is apparent that European decision makers don’t feel enough pressure to start putting their money where their mouth is. A united voice from NGOs and other actors will help to steer the debate in the right direction – towards enhanced and fair climate action.  CAN Europe is working with members and non-members across Europe to support the development of a strong, common narrative on phasing out public financial support for fossil fuels. What is your story? Make it heard! Contact: Caroline Westblom

Have any news you want to share or comments on the content ? Contact: Martin O'Brien

For continual news updates and useful resources, visit our website.

Latest Publications

See All: Climate & Energy Targets