EU to Allow State Aid for Coal Plant Exit, Low-CO2 Industry Shift

By District Energy posted 01-15-2020 15:50

  

S&P Global

Summary

The European Commission is willing to approve national government aid to coal plant operators for closing early, and to manufacturers to decarbonize their production, to support the EU's 2050 carbon neutrality goal, it said.

Many EU national governments, including Germany, are forcibly phasing out hard coal and lignite-fired power plants over the next two decades, and operators are seeking compensation for early closures. The EC would only approve compensation in line with the operator's expected losses from an early power plant closure, it said in its Sustainable Europe Investment Plan published Tuesday.

National governments would also have to structure the compensation to minimize any market or competitive distortions.
The move away from coal and lignite is driven by the EU's ever-stricter carbon constraints. "Burning lignite is one of the most polluting and CO2-intensive means of electricity generation," the EC said. The EC is already planning to increase the ambition of the EU's binding 2030 target to cut CO2 by at least 40% on 1990 levels.

The EC said it would apply current EU state aid rules flexibly in specific areas -- such as the coal plant closures -- "which seem crucial" to achieving climate neutrality. Such areas include aid to companies to decarbonize their production processes, including by switching to electricity. The EC would approve that if there were no economic incentives to drive the investment and if the companies involved cut their environmental impact more than EU standards or benchmarks.

The EC said it could also look at potential funding gaps when assessing aid to decarbonize industry, rather than the typical extra costs compared with a theoretical alternative investment which might not be in line with the EU's carbon-neutrality goal. "This could be justified [as] such investments present an important way to reduce the carbon footprint of the installations concerned," it said.

Other crucial areas include energy efficiency in buildings, district heating, and the circular economy, including reusing waste heat or CO2, and recycling waste, such as plastic.

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