Commission to allow more state aid for green projects

The European Commission is set to agree revised rules on state aid for environmental projects which would see an increase in the permitted level of public investment in new schemes.

The guidelines, to be approved next week (23 January) as part of the Commission’s package on climate change, would also allow member states to subsidise carbon capture and storage (CCS) projects, higher environmental standards for transport, waste management and tradeable permit schemes.

The new guidelines are part of a series of proposals on energy and climate change intended to put the EU on a path to achieve its aim of reducing greenhouse gas emissions by 20% by 2020 from 1990 levels. They set out the areas where member states are allowed to use public funds to subsidise schemes designed to achieve specific environmental goals.

According to a draft drawn up by officials working for Neelie Kroes, the competition commissioner, the rules would increase the maximum amount that public authorities can contribute toward schemes to 60% of the total cost, up from 40%, for large enterprises. The amount for medium-sized enterprises would go up to 70% while for small companies it would rise to 80%. If projects are awarded by competitive tender, 100% of the cost can come from public funds.

The new thresholds would apply across a broad range of schemes, including boosting the use of renewable energy sources and energy efficient co-generation, under which heat and power are produced at the same time. Projects to promote energy saving would also benefit from higher levels of public funding as would investment aid to help enterprises which have to meet environmental standards required by national rather than EU law or where national standards are higher.

The revised guidelines would extend the possibility of state aid to new types of environmental projects including CCS and improving environmental standards in the transport sector.

CCS, a process in which carbon dioxide is captured, transported and stored in suitable underground bedrock, would allow large emitters of greenhouse gases to reduce their level of emissions. The technology is still at the research and development stage and the EU is planning to set up 12 large-scale demonstration projects for coal and gas fired plants by 2015. But with limited practical experience of the technology the Commission is not proposing to define eligibility criteria for CCS schemes in the new guidelines.

Luxembourg Green MEP Claude Turmes said that the revised guidelines would "open the door to CCS because there are no criteria specified". The MEP argues that power generating companies should bear the costs of CCS as they have made windfall profits under the first stage of the EU’s emissions trading scheme (ETS).

Turmes said that overall the Commission was "logical" in being more generous towards state aid for environmental objectives provided that there was 100% auctioning of emissions rights under the ETS. The MEP said that auctioning in the electricity sector could generate €50 billion which could help compensate for the costs of higher energy prices, for example for socially disadvantaged groups. The money should be used to boost innovation and energy efficiency, particularly in the buildings sector which would create new jobs, Turmes said.

The new rules would also introduce the possibility of state aid for part-financing of environmental studies and district heating based on conventional sources.

The European Commission is set to agree revised rules on state aid for environmental projects which would see an increase in the permitted level of public investment in new schemes.