EU Lawmakers Endorse Emission Limits for Backup Power Subsidies

1 March 2018

The European Parliament’s industry and energy committee (ITRE) voted in favour of imposing an emission threshold for so-called capacity mechanisms, limiting payments to coal-fired and less efficient gas-fired plants from 2020 onwards. The decision was taken during a 21 February vote on draft reforms to the bloc’s electricity market that form part of the European Commission’s 2016 Clean Energy Package

The Clean Energy Package includes a range of measures proposed by the European Commission on 30 November 2016 aimed at providing a stable legislative framework for the clean energy transition. It contains eight legislative proposals to enhance the stability, competitiveness, and sustainability of the EU energy sector and help the bloc deliver on its international climate goals. 

Under the 2015 Paris Agreement on Climate Change, the EU has committed to reducing its greenhouse gas emissions by at least 40 percent below 1990 levels by 2030. The Paris Agreement was negotiated under the UN Framework Convention on Climate Change (UNFCCC) and entered into force in late 2016.

The various legislative efforts underway are part of the bloc’s efforts to meet these commitments, along with its goal of continuing to play a leadership role in international climate action. Officials note that these changes not only have environmental benefits, but also economic value in terms of generating new jobs in vibrant sectors. 

Divisions over power subsidies emissions cap

Capacity mechanisms are used by national governments to reward electrical utilities for maintaining existing capacity or investing in new capacity needed to guarantee energy supply as a back-up for intermittent renewable power. Capacity providers reap these rewards in addition to the income from selling electricity on the market. These capacity mechanisms often provide support to coal-fired power generation, which environmentalists warn undermines the EU’s climate goals.

Lawmakers chose to back a European Commission proposal to exclude plants emitting more than 550 grams of carbon dioxide (CO₂) per kilowatt hour (kwh) from receiving public money. If adopted into law, the cap will apply to new infrastructure from 2020 and to existing plants from 2025.

While the measure is technology-neutral on paper, in practice it disqualifies coal power plants and some inefficient gas plants from being eligible for public support. Coal-dependent countries like Poland are therefore strongly opposed to the proposed restriction, setting the parliament up for tough negotiations with EU member states.

With 52 votes in favour and only 10 against the regulation, ITRE was able to bypass a full plenary vote by the European Parliament. The vote, unless challenged in next month’s plenary, will form the parliament’s position for the upcoming trilateral negotiations of the Council, the European Commission, and the Parliament.

New capacity mechanisms approved

Two weeks before the ITRE vote, the European Commission approved capacity mechanisms in six member states, including Poland. The move was criticised by some members of parliament (MEPs) and environmental groups.

Claude Turmes, energy spokesperson for the Greens/European Free Alliance Group criticised the Commission’s competition directorate (DG COMP) for having “waived the Polish capacity mechanism that will pour millions of euros to coal-fired power plants for the next twenty years,” adding that “this is a scandalous intervention of DG COMP in the middle of a co-decision process.”

Although these capacity mechanisms will have to comply with the post-2020 rules, the Council has already hinted that existing mechanisms could be exempt from the regulation.

Priority dispatch maintained

EU lawmakers also decided to maintain priority dispatch rules, reversing a heavily criticised previous draft amendment which would have terminated the practice. Priority dispatch refers to the practice of giving renewable energy suppliers priority for accessing the energy grid, relative to other sources of power production such as fossil fuels. That policy has been in place since 2009.

Without priority dispatch, smaller-scale renewables producers would have been exposed to the same forces as big conventional energy firms. 

Renewables will now continue to be prioritised as the first source of power drawn into the grid for existing solar and wind plants. After 2020, the measure will be slowly phased out for new plants. 

Empowering consumers and household energy producers

The ITRE vote also endorsed a proposal aimed at protecting and empowering consumers. Each member state should have a comparison tool showing and ranking rates and tariffs from all suppliers. Consumers should also be able to terminate contracts without penalties and switch suppliers in less than 24 hours.

Lawmakers have also approved measures to make it easier for small-scale, household power producers to sell excess energy to the grid.

Council approves EU ETS reform rules

The past month has been a busy one in EU climate circles, as the bloc’s policymakers work to advance rulemaking in a series of areas ranging from carbon markets to energy efficiency. For example, the European Council approved on Tuesday 27 February various changes to the EU’s flagship Emissions Trading System (ETS), with the revisions due to take effect after the year 2020.

The European Parliament had endorsed the revisions during a vote held in early February. The Council’s approval was considered a formality and now paves the way for the changes to become law. 

The planned changes, proponents say, would improve the functioning of the EU’s carbon market, which has struggled in recent years with a glut of permits and low permit prices. By setting tougher pollution limits for companies and providing funding for supporting the transition to renewables, the changes also aim to help the bloc meet its climate goals under the Paris accord, along with having beneficial effects for public health and the environment. (See Bridges Weekly, 8 February 2018

Meanwhile, trilogue negotiations between the Commission, Council, and Parliament have been held over the past two weeks to advance new rules on energy efficiency targets for 2030, the share of renewables in the bloc’s energy mix in that same timeframe, and the governance of the bloc’s Energy Union. Those discussions are still ongoing and involve other elements from the November 2016 Clean Energy package.

ICTSD reporting; “Energy Union: consumers to have more choice and greater energy security,” EUROPEAN PARLIAMENT, 21 February 2018; “CORRECTED-EU lawmakers back CO2 limits to power reserve subsidies,” REUTERS, 21 February 2018; “MEPs take big step towards energy market reform,” EURACTIV, 21 February 2018; “Brussels muddies waters on state aid for coal power,” EURACTIV, 7 February 2018. 

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