Monti under fresh attack over ‘green’ state aid guidelines

Date: 12/10/00

By Renée Cordes

BIG industrial energy users could be exempt from national environmental taxes for up to a decade if they enter into voluntary agreements to combat pollution, under new proposals being drawn up by the European Commission.

But the institution is sticking to its original plan to end subsidies to producers of clean energy after just five years, sparking criticism from green groups that this would put renewable energy sources such as solar or wind power at a competitive disadvantage.

The new guidelines being drawn up by Competition Commissioner Mario Monti aim to limit state aid granted for environmental purposes in the long run while ensuring a competitive market by harmonising the rules governing tax breaks across the EU. But critics argue that they will encourage industries to use more environmentally unfriendly energy sources.

Monti had previously proposed allowing member states to exempt energy-intensive industries such as the chemicals sector from energy or environmental taxes for no more than five years. But he came under fierce attack from governments concerned that this would not give firms time to prepare for the new tax obligations.

The Commissioner was also forced to revise his proposals after number of member states, including Denmark, Germany, and Greece, claimed that they would not do enough to encourage investment in renewables.

Under his new plan, currently being discussed by member states, companies would be eligible for tax breaks for up to ten years provided that they agreed to take voluntary action to protect the environment during this period. This could include promises to reduce energy consumption or greenhouse gas emissions, which would have to be strictly monitored by member states.

Commission officials say they are confident governments will be able to live with ending such exemptions after ten years. "This is a very flexible proposal," said one.

The EU's existing guidelines are due to expire at the end of this year. The Commission could, however, be forced to extend them because of lingering questions about the impact of the new proposals on the clean-energy sector.

Environmental groups argue that Monti's reform plan contradicts a proposal by Energy Commissioner Loyola de Palacio. For example, municipal waste, which is excluded from the scope of De Palacio's plan, would be considered as a form of renewable energy by Monti.

"The whole framework of the new guidelines undermines any public policy to support renewables," said Giulio Volpi of the World Wide Fund for Nature, adding that it was unfair to limit subsidies for renewables while the Commission kept them for nuclear and fossil fuels.

Big industrial energy users could be exempt from national environmental taxes for up to a decade if they enter into voluntary agreements to combat pollution, under new proposals being drawn up by the European Commission. But the institution is sticking to its original plan to end subsidies to producers of clean energy after just five years, sparking criticism from green groups that this would put renewable energy sources such as solar or wind power at a competitive disadvantage.