Saturday

30th Sep 2023

15 EU states subsidise fossil-fuels more than renewables

  • Heavy industry, transport and agriculture are the sectors benefitting most from EU fossil-fuel subsidies (Photo: angeloangelo)
Listen to article

Fifteen EU member states gave more subsidies to fossil fuels than to renewable energies in 2020, despite their climate commitments, a new report from the European Court of Auditors revealed on Monday (31 January).

On average, renewable-energy subsidies are higher than fossil-fuel subsidies across the EU, but there are significant differences between EU countries.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In 2020, Finland, Ireland, Cyprus, Belgium, France, Greece, Romania, Lithuania, Poland, Bulgaria, Sweden, Hungary, Slovakia, Slovenia and Latvia all allocated more than the EU average on fossil-fuel subsidies — and all higher than renewable-energy subsidies.

Fossil-fuel subsidies accounted for €55-58bn per year from 2008 to 2019, but two-thirds of these subsidies (€35bn in 2018) were tax exemptions or tax reductions.

Industry, transport and agriculture are the sectors that have benefited the most from EU fossil-fuel subsidies.

However, according to the auditors' report, these subsidies can undermine the effectiveness of carbon price signals and distort markets, making clean and energy-efficiency technologies relatively more expensive.

More than a decade ago, G20 countries called for the end of fossil-fuel subsidies by 2020. But the EU and its member states only managed to commit to phasing them out by 2025 — a move that will be "a challenging social and economic transition," EU auditors also warned.

Currently, only a dozen EU countries have indicated their intention to phase out some of the existing fossil-fuel subsidies — with six countries having a specific timeline to phase them out.

In their report, the auditors argued that the 'free allowances' under the cap-and-trade EU carbon market can also be considered fossil-fuel subsidies - as they mostly cover emissions from fossil-fuel use.

These free permits are designed to help heavy industry, aviation and, in some member states, the electricity sector, remain competitive against rivals based in non-EU third countries, but previous reports have cast doubt on their efficiency.

"Free allowances…have slowed the uptake of low-carbon technologies," the report said, pointing out that the European Commission should better target these permits, especially if the system is to be prolonged for another decade.

They also warned national capitals that all types of fossil-fuel subsidies can create unfair treatment for some sectors, triggering resistance to the transition towards a greener economy, such as the so-called 'yellow vest' protests in France.

Lack of consistency

Meanwhile, the report notes that one challenge for the bloc's environmental action is to ensure consistency between energy taxation and climate objectives — upholding the so-called 'polluter pays' principle.

For example, coal is taxed less than natural gas, and some fossil fuels are taxed significantly less than electricity which can be produced by renewables.

In practice, this means the minimum tax rate can be applied to the most-polluting energy source.

But new rules, currently under discussion, would introduce fresh taxes based on environmental performance, eliminate the favourable treatment of diesel over petrol, and remove the tax exemption of kerosene for air passenger flights.

The commission's own evaluation of its taxation directive concluded that existing rules do not support the uptake of low-carbon alternatives and do not provide legal clarity for some new energy products.

It also added that the minimum taxation rates set in the directive no longer fulfil its initial objective - to reduce differences in national energy-tax levels.

While some countries have imposed high taxes, others keep taxes for fuel close to the minimum, generating distortions in the internal market, EU auditors said.

EU energy ministers clash amid gas price uncertainty

EU energy ministers met on Thursday to debate spiking gas and electricity prices, and clashed over market reform - with some countries, led by Germany, opposing actions put forward by France and others.

EU agency warns ETS emission-cuts are off track

The European Environment Agency warned current projections indicate emissions-reductions in member states covered by the EU's cap-and-trade carbon market are insufficient to meet the bloc's new climate targets for 2030 and 2050.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us