What is happening? As part of its coal phase-out, Germany promised multi-billion Euro payouts to lignite operators for closing their plants. On 2 March 2021, the Commission announced that it would open a formal investigation procedure into those promised compensations based on doubts about their compatibility with EU State aid rules. The opening decision is expected to be published in the coming weeks, and followed by a one-month public consultation. The Commission will then have up to 18 months to complete its assessment – though cases are generally solved sooner.
Why is it important? As the EU tries to reach its climate and environmental goals, the Commission must make sure that it is not giving the green light to subsidies that drive the bloc in the opposite direction. In Germany’s case, it is fundamental not to use taxpayers’ money to pay for mistakes made by companies or governments – like investing in clearly stranding fossil fuel infrastructures, overcompensating an unambitious phase-out, or making up for failure to enforce the polluter pays principle – and in fact cleaning up after the companies. Lignite operations come at a high cost for people and ecosystems, and State aid decisions must take this into account. The decision to compensate Germany’s lignite plant closure will set an example for other coal phase out plans in Member States, as current ETS prices (43 euros/ton CO2 in March 2021) make it increasingly costly for coal plants to operate.
What is the legal context? The Commission is merely expected to look into whether this compensation package aligns with internal market rules only – this was mentioned in the announcement of the investigation, and would be in line with DG Competition’s general approach to State aid cases historically. Until now, and even though the EU Treaties arguably oblige it to do so, the Commission has not strictly assessed State aid cases in the broader context of environmental and climate policies. At the end of 2020, DG Competition kicked off a process to align competition rules with the European Green Deal; this should concern the entire State aid practice and rules. To date, there have been no specific State aid guidelines on coal plant closure compensation but the Commission has started to handle them case by case. The decision by the Commission on the German lignite case will send a clear message either in favour of climate protection or in favour of the fossil industry.
What do we want?
“The EU competition policy should reinforce the European Green Deal and its climate, zero pollution and just transition objectives, and not secure yet another stream of subsidies to the coal industry. Under no circumstances can citizens’ money finance bad business decisions which aim to prolong the use of coal or other fossil fuels,” said Elif Gündüzyeli, Senior Energy Policy Coordinator at CAN Europe.
“The coal era is over and operators have known it for years, but they chose not to adapt. Instead of subsidising polluters with public money to compensate for their outdated business choices, the German government should claim back their air pollution, water and carbon debt, and hold polluters accountable for the damage they inflict to people and nature,” said Christian Schaible, Policy Manager for Industrial Production at the European Environmental Bureau.
More background and sources here.