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State Aid | 2 August 2021

Consultation on the Revised Climate, Environment and Energy Aid Guidelines (CEEAG) post-2022
State Aid
Clean energy

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Consultation on the Revised Climate, Environment and Energy Aid Guidelines (CEEAG) post-2022

This is ClientEarth’s reply to the European Commission’s Consultation on the draft State Aid Guidelines for Climate, Environment and Energy (CEEAG).

The Commission’s draft CEEAG is more robust than the 2014 EEAG and aims at a higher level of environmental protection, which includes decarbonisation of the energy sector. Nevertheless, there is room for improvement as different aid categories seem to have yielded to political compromises over much needed environmental protection ambitions, without any scientific or legal justification.

Aid measures notified by Member States under the CEEAG must be consistent and actively contribute to reaching the EU Green Deal’s objectives and the Union’s climate targets for 2030 and 2050. As guardian of the treaties, it is on the Commission to verify this consistency when performing a broader compliance check with relevant Union law, which should systematically include environmental and energy law and principles. This notably means that the Energy Efficiency First principle and the Energy Solidarity Principle should apply as a priority baseline to any aid in the energy sector. The Commission’s proposal to subject aid measures to public consultations will be an effective tool to design aid schemes that are both compliant with the law and not unduly distortive of competition, and should therefore be the norm for all aid categories.

However, the draft CEEAG makes a mistake, economically and climatically, by supporting fossil gas as a transition fossil fuel and treating it differently from other “most polluting fossil fuels”. Support to fossil gas is premised on denial of the latest scientific knowledge and will increase negative environmental externalities in the market. The Commission will need to adopt much stronger safeguards against too much aid to fossil gas, which will include an in-depth analysis and strict interpretation of the project’s lock-in effects and contribution to the 2030 and 2050 targets. The same applies for aid to hydrogen, which should be limited to renewable hydrogen, subject to conditions. If the CEEAG are to allow support to low-carbon hydrogen, stringent eligibility requirements should apply to allow for proper greenhouse gas accounting and future conversion to renewable hydrogen.

Aid measures notified under the innovative new aid category for decarbonisation measures, in which multitechnology competitive bidding procedures are likely to become the rule, will need to be treated with great caution in order to not to favour one single technology against other complementary technologies. Such schemes should also leave amble room for energy communities. The Commission should also revise the conditions for aid to several technologies eligible under this new category, notably biomass, high efficient cogeneration, hydropower and CCS/CCU.

A new aid scheme for improving the energy and environmental performance of buildings has been included in the draft CEEAG. The Commission suggests the possible cumulation of aid for energy efficiency improvements in buildings with aid for the installation of integrated on-site renewable energy installations, storage equipment, recharging infrastructure or digitisation equipment. The approval of this aid is conditional on compliance with energy performance improvements, which are not ambitious enough. The method for calculating eligible costs also remains complex and the aid intensities should be increased.

The draft CEEAG include a novel section on aid for the closure of coal, peat and oil shale activities. In light of the emergency to phase out these polluting fuels in the shortest term, clarity as to how Member States can incentivise early closures is welcome in principle. The CEEAG fails to include strong safeguards though, such as a mandatory closure date (that should not be beyond 2030), on indications on how to calculate the “foregone profits” or “additional closure costs” faced by the operators. As presented, the regime appears flexible and could leave a large room for discretion to Member States to pay off coal plants and mines for closing whereas the market is already moving into that direction.

Finally, ClientEarth provides the Commission with feedback on other aid categories as well, such as clean mobility, exemptions from environmental taxed and for energy intensive users, energy infrastructure, district heating and cooling.