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EUR | Dec 21, 2021

EU lays out rules to allow more state aid for green projects

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European Commission Vice-President in charge of Europe Fit for the Digital Age, Margrethe Vestager, talks at the start of a meeting of the College of Commissioners at the Berlaymont, in Brussels, Belgium, November 10, 2021. (Photo: Stephanie Lecocq /Pool via REUTERS)

BRUSSELS (Reuters)

EU countries will be allowed to pump more money into green projects in climate, energy and the environment, while state support for fossil fuels is unlikely to be approved by Brussels, the European Commission said on Tuesday (December 21).

The commission, which vets national governments’ state aid to check that it does not distort competition in the European Union single market, set out the upgraded competition rules aimed at helping countries meet climate change targets.

The EU aims to cut its net greenhouse gas emissions 55 per cent by 2030 from 1990 levels and eliminate them by 2050. That will require huge low-carbon investments, including extra energy sector investments of €350 billion (US$395 billion) a year this decade.

“Although a significant share will come from the private sector, public support will play a role in ensuring that the green transition happens fast,” EU competition chief Margrethe Vestager said.

The new rules expand the areas where countries can offer support, including clean transport, energy efficiency in buildings, and protecting nature.

Aid can cover up to 100 per cent of the funding gap for green projects, including through measures like carbon contracts for difference, which would guarantee a carbon price to a project developer, irrespective of the price on the EU’s carbon market.

Support for fossil fuels such as coal and oil is unlikely to be approved, while new investments in natural gas must be compatible with the EU’s climate targets and help countries shift away from higher-emitting fuels, the Commission said.

Brussels also set out guidelines for how countries can support the closure of coal, peat and oil shale plants.

EU competition enforcers are investigating German plans to provide €4.35 billion in compensation to utilities RWE and LEAG to speed up the phasing out of lignite coal power plants. Brussels said it was concerned about whether the compensation for foregone profits was the minimum payout in line with EU rules.

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