Monti seeks end to state aid for renewables in five years

Date: 06/04/2000

By Renée Cordes

COMPETITION Commissioner Mario Monti is calling for state aid to the renewable energy industry to be cut off after five years, forcing companies in the nascent sector to stand on their own feet quickly.

A draft paper drawn up by Monti's officials states that the Commission is "generally speaking, not in favour of aid towards the operation of a firm", but adds that "such aid may be authorised in specific cases" in the environmental field. However, it insists this should be "strictly limited" to compensating companies for the extra costs of producing renewable energy compared with those for conventional sources and says these subsidies should be phased out over time.

Monti's proposals for amending the the Commission's guidelines on state aid, which expire at the end of June, have been held up by numerous delays to his energy counterpart Loyola de Palacio's plans for measures to boost the use of renewables in the EU.

But with De Palacio's proposals now expected to be ready for discussion by energy ministers in May, Monti is pressing ahead with his plans and sent the draft paper to member states for their comments this week.

His approach has, however, been attacked by environmental campaigners, who fear that producers of clean renewable energy will be put at a disadvantage to traditional power generators if subsidies are limited. They argue that this will provide little incentive for firms to invest in renewables, hampering the EU's efforts to reduce emissions of greenhouse gases to combat climate change.

"It will undermine possibilities for countries to decide what kind of support system to provide for renewables," said Guilio Volpi of the World Wide Fund for Nature (WWF), adding: "Normally a return on this kind of investment would take at least ten years."

Volpi also warned that companies would be unwilling to invest without any guarantees that renewables would be competitive in the long term.

WWF, Greenpeace and Climate Network Europe sent a joint letter to Monti this week asking him to reconsider his proposal, arguing that it would undermine efforts to boost the use of renewables in the EU and limit the options for fighting climate change.

The Commission has repeatedly warned that it wants to see an overall reduction in the amount of state aid paid to firms. However, even Monti has acknowledged that environmental aid accounts for only a small fraction of the total subsidies granted by member state governments - just 1% of total aid granted to the manufacturing sector between 1994 and 1997, ranging from nothing in Greece, Ireland, Italy and the UK to 13% in Denmark.

Competition Commissioner Mario Monti is calling for state aid to the renewable energy industry to be cut off after five years, forcing companies in the nascent sector to stand on their own feet quickly.