Daily Management Review

EU Energy Reform Agreement Is Shaken By A Late Push For Coal Subsidies


EU Energy Reform Agreement Is Shaken By A Late Push For Coal Subsidies
The European Union's plans to ratify a reform of the bloc's power market on Monday have been derailed by a last-minute request to extend subsidies for coal plants. The reform was intended to move the electricity system towards cleaner energy sources.
Energy ministers from the EU's member states will meet in Luxembourg on Monday to decide on a shared position on new regulations for the EU power market. These rules are intended to increase the use of low-carbon energy and prevent a recurrence of last year's energy crisis, when record-high petrol prices caused consumers' energy bills to soar.
New state-backed renewable energy sources and low-carbon nuclear power reactors will be placed on fixed-price "contracts for difference" as part of the planned reform, which aims to increase the stability and predictability of electricity pricing. Ministers must work out specifics like how to use any money generated by these subsidy programmes.\
However, a last-minute suggestion by Sweden, which is currently in charge of rotating the EU presidency, to extend the capacity mechanism subsidies for coal power stations, which pay them to keep adequate electricity generating capacity on standby to prevent blackouts, has complicated the negotiations.
Poland, which might extend its coal plant support programme into 2025 as a result of the proposal, declared last week that the concept had support from the majority of its citizens.
However, EU diplomats claimed that some states had rejected the idea due to environmental concerns, endangering a compromise on the broader power reforms.
"We think this is a potential dealbreaker," one EU country diplomat said.
The fossil fuel that emits the most CO2 is coal. If the world is to prevent the worst effects of climate change, scientists say its use must drastically decrease this decade.
Some EU nations contend that in order to assist new sectors in areas where coal-dependent communities have long been the norm, they must be more flexible in how quickly they phase out the fuel. Around 70% of Poland's energy comes from coal.
The coal loophole would only be permitted "under very specific conditions," according to a senior EU official. The official stated that they anticipated that the electricity market reforms would be approved by the ministers, but it was unclear if the coal carve-out would be included in the final agreement.
According to the suggestion, which was obtained by Reuters, capacity mechanisms put in place before to July 2019 may temporarily avoid a CO2 restriction the EU typically imposes on these schemes, allowing coal stations to participate, if they fail to draw in enough lower-carbon generators.
Once the EU nations have decided on a position, they must work with the EU Parliament to finalise the electricity market reform in order to enact the legislation before the EU Parliament elections in 2019.