Response to DG Competition Consultation on ENVIRONMENTAL AND ENERGY AID GUIDELINES

Transcription

1 securing cmpetitive energy fr industry ID-number Transparency Register: Respnse t DG Cmpetitin Cnsultatin n ENVIRONMENTAL AND ENERGY AID GUIDELINES As part f the mdernisatin f the EU State aid plicy ( SAM State Aid Mdernisatin ), DG Cmpetitin (DG COMP) cnsiders that the Envirnmental Aid Guidelines shuld be reviewed t update them in the light f experience with their applicatin, recent develpments in energy markets and in the ecnmy, as well as t align them with the cmmn apprach t mdernising aid framewrks under SAM. IFIEC Eurpe (IE), representing the energy intensive industrial cnsumers frm different Eurpean Members States, fr whm energy is a majr cmpnent f perating csts and directly affects cmpetitiveness, already cmmented n a previus draft n 29 April 2013 and welcmes the pprtunity t give its viewpints t the inclusin f energy and climate related issues t the Envirnmental and Energy Aid Guidelines (EEAG). EU industry s cmpetitiveness is currently threatened due t large energy price differences with majr cmpetitrs. The negative impacts f such a develpment are investigated by the Eurpean Cmmissin in its current reprt n energy prices. Any additinal cst burden frm EU climate and / r energy plicy will inevitably lead t further lss f market shares and in sme cases, clsures f EU prductin sites in energy intensive sectrs. The apprach taken in the EEAG, hwever, des nt safeguard r strengthen cmpetitiveness, e.g. based n the fllwing: The prpsed requirements fr future renewable energy surces (RES)-supprt are quite weak, i.e. cstly supprt regimes will cntinue t grw and add csts, Cnversely, the rules fr exemptins fr industry frm related surcharges are very strict, Existing energy tax relief regimes based n the Energy Taxatin Directive are questined, Supprt fr industrial cgeneratin prjects based n the Energy Efficiency Directive (EED) is unsure fr the future. These are threatening signals that d nt help t align EU climate and industry strategies. EXECUTIVE SUMMARY State Aid Guidelines have t take int accunt EU s glbal cmpetitiveness rather than limit themselves t a level playing field within the EU. IE welcmes the cncept f carbn leakage being mentined in the cntext f surcharges f renewable energy supprt, thus accepting that prductin and investment leakage is driven by the effects f the whle climate and energy plicy tl bx rather than nly by Emissin Trading System (ETS). cntact: Directr f Crdinatin Lars Jpe, mbile: , jpe@ifieceurpe.rg Avenue Luise 250/80, B-1050 Brussels, web: aisbl NI

2 Existing and well functining legal framewrks must nt be undermined r even remved by EEAG. There must be prtectin f cnfidence fr existing measures based n valid EU legislatin (Energy Taxatin Directive, Energy Efficiency Directive). Investments are built upn these expectatins. IE welcmes the establishment f rules addressing the aid t RES, which currently are granted by EU Member States (MS) in an extensive manner in terms f vlumes, time perids and technlgy maturity. IE sees the imprtance f streamlining these regimes fr limiting csts strictly t efficient csts fr the cnsumers and fr the purpse f achieving the IEM. IE welcmes the pssibility f supprt fr increasing energy efficiency. It shuld be made clear that any aid assessment shuld als be based n the cmparisn f the CO 2 savings per Eur f aid fr RES technlgies, including bimass, energy efficiency and CHP, since energy efficiency and CHP aid are ften relatively cheap cmpared t aid fr RES technlgies. Therefre, any mre restrictive apprach t energy efficiency and cmbined heat and pwer (CHP) cmpared t RES is a priri nt apprpriate. Stable planning cnditins fr cmpanies investing and having invested in CHP must be given. T avid further dis-harmnisatin f the Eurpean energy and electricity tax framewrk, EEAG shall clearly state that any reductins r exemptins granted by Member States based n the ETD rules as being cnsidered justified cases f state aid, even if thse are in accrdance with the ETD granted belw minimum tax levels. As lng as there is n cmmn scheme f renewable supprt thrughut the EU, Eurpe needs t allw fr natinal exemptin schemes at a level f the ttal cst trend f RES subsidies. RES exemptins shuld be aligned with the ttal cst trend f RES subsidies. IE supprts efficient investments in infrastructure t the extent that the investment csts are at least cmpensated by a psitive cst benefit effect fr the cnsumers. IE shares the cncerns that public interventins lead t electricity market distrtins and a lack f investment in new and flexible capacities. Capacity mechanisms must themselves be seen as market interventins nly t be used as a last resrt. The cumulative effects f EU climate and energy plicy measures must be recgnized fr any exemptins granted n taxes and/r surcharges. These Guidelines need t allw Member States t ffset 100% f the additinal csts the varius decarbnisatin plicies impsed n energy intensive industry which are nt brn by nn-eu cmpetitrs. 2

3 GENERAL REMARKS ON COMPETIVENESS In general, IE is in favr f creating a "level playing field" fr business activities inside the EU and therefre all kinds f state aid shuld be challenged against their impact n market functining and cmpetitin. Hwever, we start at a very difficult psitin fr EU industry: Energy price differences t cmpetitrs are as high as never. State aid mdernizatin must help t prmte the functining f the IEM, withut hindering the EII cmpetitiveness glbally. Currently millins f manufacturing jbs have been lst in the EU since the start f the financial and ecnmic crisis. The cmpetitive psitin f EU industry is deterirating rapidly cmpared t several majr regins in the rest the wrld. There is an urgent need t restre EU industry cmpetitiveness with cncrete steps t implement EU s "industrial renaissance". IE insists that EU cmpetitin plicy needs t lk at the glbal cmpetitin and nt just n the distrtins within the internal market. EU s ecnmy as a single entity has its majr cmpetitrs in the utside wrld (in America and Asia). State aid plicy must allw fr adequate hardship regimes, cst limits and specific measures fr industrial energy users, until a level glbal energy playing field is restred. These hardship regimes d nt cnstitute a prblem; they are merely individual MS s attempts t reduce the cmpetitive disadvantage f EU manufacturing cmpared t the rest f the wrld. Ecnmic prspects fr fssil fuels and their prices have dramatically changed since the time when the 20/20/20 targets were fixed. The rapid develpment f cstly RES thus has a huge impact n electricity price differentials versus the rest f the wrld. By 2030, EU s greenhuse gas emissins will nly represent sme 5% f glbal emissins. Therefre, mre than ever, glbal actins are needed in rder t btain tangible results in the field f climate plicy and establish a wrldwide effective climate change plicy. Eligibility criteria fr exemptin regimes must nt be t strict; they shuld take int accunt the diversity f industrial branches and their market cnditins (cmplex value chains, ability t cst pass thrugh). A ne-size-fits-all apprach is nt adequate. GENERAL LEGAL REMARKS IE understands the mtivatin f the state aid mdernizatin t make prcesses quicker and mre streamlined. IE hwever, sees the ppsite ccuring: an increasing scpe with rather lnger and mre frequent prcesses t be expected. 3

4 IE calls upn the Cmmissin t direct that state aid plicies make the restratin f EU s industry an bjective f strategic cmmn interest and therefre take int accunt internatinal cmpetitiveness f Eurpean EII int their plicy and regulatry regimes. What state aid is, has been defined ver a lng prcess by EU Curt decisins. These decisins have given guidance t MSs fr designing natinal measures utside such state aid definitin. Such guidance and definitins must nt simply be annulled by EEAG. EEAG shuld nly be remdelled if the industrial cntext requires s. Article 107 paragraph 3 TFEU gives the EU a margin f discretin t shield Eurpean EII frm distrtins twards nn EU-cmpetitrs rather than nly cnsider distrtins within the EU internal market. IE urges DG COMP t use this apprach in rder t strengthen the EU ecnmy against its majr cmpetitrs. With the EEAG, DG COMP enters the brder zne f its cmpetences. On the ne hand this relates t the cmpetences f ther DGs and n the ther hand f Member States (MSs). DG COMP must nt unduly limit the MSs freedm f chice t implement natinally adapted supprt schemes and related exemptins. The subsidiary principle must have a high pririty als in future. EEAG must nt infringe any substantive EU law as e.g. directives r regulatins, apprved thrugh sensible, cmprehensive decisin making prcesses f the ther EU institutins. New EEAG must nt retractively questin measures implemented based n existing EU legislatin. SPECIFIC REMARKS ON Aid t energy frm renewable energy surces (5.2) IE welcmes the establishment f rules addressing the aid t electricity frm RES, which currently are granted by EU MSs in an extensive manner in terms f vlumes and time perids. These rules must help aviding ver-subsidizatin and t lengthy subsidy perids fr future supprt regimes in the MS. This is vital t safeguard acceptance fr the restructuring f the energy system fr the pwer cnsumers. State aid prvided eternally is nt acceptable. Subsidies fr renewables shuld nly be given n a temprary basis and must be phased ut gradually. Any RES subsidy granted shuld be limited, fully transparent in terms f csts and bjectives, and shuld decline ver time in the same way as RES exemptins. Until phase ut, supprt that takes int accunt the electricity price and technlgical imprvement is preferred ver a feed in tariff. Cmpetitive ways f identifying beneficiaries 4

5 fr RES supprt like in bidding prcesses are a gd way t achieve a higher cst efficiency, which is lacking currently. Aid fr RES is ften granted t businesses which therwise wuld never survive. If aid is the nly element which allw these surces stay alive market distrtins wuld be particularly high. Therefre MSs have a particularly high respnsibility fr the prprtinality and apprpriateness f these aid measures. The guidelines crrectly mentin the need t cnsider the interactin f different plicy measures with the same bjective here especially imprtant EU Emissin Trading System (ETS) and RES supprt - in rder t evaluate the envirnmental effect f the measure. On this backgrund RES has a rather limited effect n carbn abatement, since such abatement in the sectr in questin (electricity generatin) is regulated and safeguarded by EU ETS already. Cnsequently, the hurdles fr envirnmental state aid fr RES-E shuld be rather high. Hwever, the guidelines give the ppsite impressin, namely that RES are deemed t be nrmal beneficiaries f envirnmental state aid. RES technlgies are a significant share f the electricity market but remain unpredictable beynd a few hurs and variable in their utput, which is distrting the market and adding t balancing csts. Therefre RES-E generatrs (r installatins) must have 'balancing and back-up respnsibilities' just as ther market participants. Energy efficiency measures... (5.3) Cncerns abut market failures (142) shuld g further than the example abut buildings (building wner bears the renvatin csts (investments), energy efficiency benefits accrue with the tenant). Cgeneratin (CHP), delivering an imprtant cntributin t energy efficiency gals is currently under heavy market pressure due t relatively high prices f natural gas in Eurpe caused by a lack f cmpetitin and electricity market distrtins as a result f huge RES-subsidies. Therefre, IE welcmes the pssibility f perating aid fr high-efficient CHP. A phase ut f such aid is adequate, but such aid limited t a perid f five years nly is much t shrt.. IE welcmes in principle that fr new cgeneratin (als named cmbined heat and pwer CHP) the same cnditins apply as fr RES technlgies (in 5.2, therefre als 5.1) and fr existing CHP the same cnditins apply as fr existing bimass (in 5.2). Hwever, it shuld be made clear that any aid assessment shuld als be based n the cmparisn f the CO 2 savings per Eur f aid, including fr bimass, energy efficiency and CHP. Therefre, mre reduced investment aid rates fr CHP (e.g. 65 % fr small enterprises) as cmpared t ther nes rates (80%) are nt apprpriate. 5

6 ... including cgeneratin... (5.3) The existing regulatin in the EED must give stable planning cnditins fr cmpanies having invested and investing in cmbined heat and pwer (CHP). The prvisins f the draft EEAG is nt in line with the target f the EED. We recmmend keeping the existing limitatins (80%, 70% and 60%) fr the investment aids t new CHP. Fr heat prductin, the timing f auctins being nt cmpatible with industrial time cnstraints, we recmmend t grant perating aid fr new cgeneratin thrugh feed-in premium which are mre adapted t industry needs, r at least prvide fr timely auctining prcedures. Making the market price a reference fr the supprt is prblematic fr heat since there is n market price. The reference price shuld be based n the prductin csts f the cunterfactual which a cnventinal heating system is using the same fuel with the same capacity in terms f the effective prductin f heat. T avid cnfusin and remve fr the future all the risks f wrng interpretatins, we suggest that the paragraph (151) is cmpleted as fllws: Aid fr new CHP Fr new cgeneratin, perating aid fr new installatins will be cnsidered cmpatible if all f the fllwing cnditins are met: (a) (b) (c) Aid is granted by way f a feed-in-premium. Beneficiaries are subject t standard balancing respnsibilities. Aid is nly granted until the plant has been fully depreciated accrding t nrmal accunting rules. Any investment aid previusly received must be deduced frm the perating aid. In rder t limit the effects n the raw material markets, Member States may exclude r limit energy prductin using bimass frm the supprt scheme. N ther perating aid may be granted t new installatins using bimass in that case. And the paragraph (152) is cmpleted as fllws: Aid fr existing CHP after plant depreciatin Cmpared t separate prductin f heat and pwer, higher perating csts may prevent a CHP plant frm perating even after depreciatin f the installatin as the variable perating csts can be higher than the marginal revenues. The Cmmissin may find aid t be cmpatible. The Cmmissin might cnsider perating aid fr existing CHP after plant depreciatin cmpatible in the framewrk f the EED and if it leads t a mre cst-efficient fulfilment f the energy efficiency target. 6

7 Aid t Carbn Capture and Strage (5.5) IE s starting pint is that CCS culd becme an ecnmically viable slutin if alternative lwer cst alternatives have been exhausted and technlgy imprved respectively. Ultimately, market cnditins alne must determine the preferred technlgy t reduce carbn emissins mst cst effectively. IE sees the need t have CCS n the lnger term in rder t prvide cst effective baselad prductin. Hwever, the develpment f this technlgy cannt create an additinal burden n EII. Aid in frm f reductins r exemptins frm envirnmental taxes (5.6) Any rigid psitin taken by the EEAG n tax reductins will create an bstacle fr MSs t set ambitius natinal levels f energy r electricity taxatin: Because setting such ambitius natinal levels f energy r electricity taxatin will either face a lss f cmpetiveness f their dmestic EII r they will face severe state aid investigatins by the COM. Cnsequently, MSs will require ptinal taxatin rights in the curse f the n-ging revisin f the Energy Tax Directive. Hwever, such ptinal taxing rights mean a clear path away frm harmnizatin f the Eurpean energy and electricity tax framewrk. T avid further dis-harmnisatin f the Eurpean energy and electricity tax framewrk, EEAG shall clearly state that any reductins r exemptins granted by Member States based n the ETD rules as being cnsidered justified cases f state aid, even if thse are in accrdance with the ETD granted belw minimum tax levels. As a cnsequence the current wrding f pint (175) is nt apprpriate: aid, allwed in accrdance with the ETD, even belw the minimum tax levels, shuld be cnsidered as a harmnised envirnmental tax. Aid in frm f reductins in funding supprt fr electricity frm renewable surces (5.7) Reductins frm surcharges have nt been cnsidered state aid in the past if they stay utside the definitins and criteria fr state aid elabrated by earlier EU legal decisins. Therefre, per se IE can t accept a carte blanche fr Eurpean Cmmissin t tackle such exemptins as state aid. Aid in the frm f reductins shuld be pssible fr cmpanies which are especially burdened thrugh a high energy intensity and internatinal cmpetitin with cmpetitrs which d nt face and equivalent burden. This must include als cmpanies active in intermediate elements f the manufacturing value chains even thugh nly indirectly expsed t internatinal trade and cmpetitin (e.g. industrial gases). 7

8 Renewable energy supprt results in a large variety f cst elements fr cnsumers acrss the EU impacting n the cmpetitiveness f the industry by creating csts nt brne by cmpetitrs. Therefre, the EEAG shuld nt intervene with exemptins n surcharges t fully ffset the cst impact impsed by the RES prmtin. Mrever, since the cst burden f the surcharges is MS specific, this shuld als be the case fr the exemptins. Indeed, the height f the exemptins shuld be in line with the height f the surcharges and thus MS specific in rder t be able t create a RES plicy which des nt deterirate the cmpetitiveness f the EII and maintains a level playing field bth within the EU and glbally. In cnclusin, MS shuld have the ptin t prvide supprt t EII t shield them frm thse additinal cst burdens in line with their natinal burden. Cnditins stipulated in the Guidelines fr this aid d nt reflect ecnmic reality in the fllwing respects: Electricity generatin installatins and energy intensive manufacturing plants share the characteristic f being highly capital-intensive with lng lifetimes f ver 20 years. The EEAG draft stipulates that the aid shuld be degressive and incmplete with a minimum financial burden f 15% (until ) and 20% (as f ) f the nrmal charge. These percentages are nt linked with ecnmic reality, reflecting the cmpetitiveness f EII and are hence arbitrary. Mrever, this runs cunter the aim f aviding cmpetitive disadvantages, and des nt create additinal envirnmental advantages. It als undermines the existence f vluntary agreements in certain MS. T be equitable it must be pssible t grant relief frm the csts f renewables supprt fr the same time perid as the supprt is granted. Only then wuld manufacturing s cst disadvantage vis-à-vis cmpetitrs be erased. When estimating the risk f carbn leakage fr branches r cmpanies all direct and indirect csts related t energy and climate plicy shuld be taken int accunt. Indeed, especially in MSs with multiple decarbnisatin measures in place, the cumulative impact f multiple 20% residual csts can f itself seriusly damage industries cmpetitiveness. Secndly, since there is made reference t the carbn leakage status, all criteria fr determining the carbn leakage status shuld be taken int accunt. Indeed, DG COMP prpses eligibility based n the cst increase incurred as a percentage f GVA and n trade intensity. This criteria stems frm the Carbn Leakage List definitin as stipulated in Article 10a f the ETS Directive. Hwever, the ETS Directive describes tw ther situatins in which a sectr r sub-sectr is deemed t be expsed t a significant risk f carbn leakage, namely (i) the sum f direct and indirect additinal csts is at least 30% r (ii) the nn-eu trade intensity is abve 30%. Since aid shuld be granted t all installatins which culd suffer frm carbn leakage, these tw pssibilities shuld als be cnsidered. 8

9 Industry asks fr clarificatin regarding the payment as a lump sum amunt. This cannt be the nly manner f granting exemptins. In any case, a tax credit apprach des nt ensure full prtectin against lss f cmpetitiveness, since there is n maximum tax level in the EU. Publicatin f the amunt f aid received by individual cmpanies is acceptable if aggregated, s that it des nt reveal cmmercially sensitive infrmatin. Fr example, publishing the amunt f the reductin in RES-E-surcharges reveals the actual electricity cnsumptin f the individual cmpany, which in turn allws fr cnclusins abut its prductin technlgy, utput r efficiency. Hwever, these data cnstitute cmmercially sensitive infrmatin, the publicatin f which will hamper its cmpetitiveness situatin. Furthermre, the EEAG claims that all energy cnsumers shuld bear the csts f financing RES. This is nt apprpriate. Individuals r cmpanies self-generating their wn pwer, at least in an envirnment-friendly way such as CHP, baselad-res, r pwer generatin frm waste gases shuld nt necessarily bear the csts f additinal RES supprt since this wuld endanger such eclgically beneficial generatin. Therefre, it shuld nt be seen as state aid if a member state exempts such kinds f self-generatin frm RES charges. Aid t energy infrastructure (5.8) The develpment f electricity and natural gas grids and ther infrastructure is necessary t imprve liquidity and cmpetitin in the internal energy markets, and t stimulate market integratin. IE therefre supprts investments in infrastructure t the extent that the investment csts are at least cmpensated by the psitive impact n the prices f the underlying cmmdities. In general, grid csts shuld be charged thrugh t grid users with respect f the three basic principles f the electricity and gas directives: tariffs must be nn-discriminatry, transparent and cst reflective. Only efficient csts will be reimbursed thrugh tariffs. This means grid users shuld cntribute t grid csts t the extent they are causing them. IE can accept that new infrastructure prjects are financed by alternative means (including state aid) if the scietal benefits exceed the csts. In any case, all new infrastructure must be available fr third party access in accrdance with the 3 rd Energy Package. Cmpanies prviding services fr grid stability / ptimal grid usage can be cmpensated fr these services granted. This shuld never be cnsidered state aid. Referring t (193) and (200), IE wuld like t see the assessment parameters since gas strage and a LNG-terminal - is bth a cmmercial activity and can cntribute t grid stability. 9

10 IE insists that transmissin grid charges impsed t industrial cnsumers cnnected t the transmissin grid be subject t the same limits as thse applicable fr generatrs. In this cntext IE underlines the imprtance f COM Regulatin (EU) N 838/2010 f 23 September In its Annex B, this regulatin limits part f the transmissin grid charges fr electricity prducers t 0 t 0,5 /MWh, except fr certain MSs. IE wuld like t pint ut that the arguments that were used t justify these limits are als valid fr end users (avid t discurage investments in new prductin units, assure level playing field inside the EU), and mre in particular fr industrial cnsumers, which, mrever, have t face glbal cmpetitin. Aid fr generatin adequacy (5.9) IE shares the cncerns that public interventins, such as supprt fr renewable energy, lead t electricity market distrtins and a lack f investment in new and flexible capacities. Capacity mechanisms must themselves be seen as market interventins nly t be used as a last resrt when it is clearly demnstrated that the nn-disturbed market itself has failed. As a cnsequence EC and MS shuld first and fremst fcus n the eliminatin f market distrting elements such as ver-subsidizing renewable energy and the lack f balancing respnsibility fr intermittent generatin such as slar and wind. Plitical and regulatry uncertainty shuld als be reduced t create a stable investment climate. Capacity mechanisms shuld be a last resrt slutin fr lack f generatin adequacy: Vluntary demand respnse shuld be cnsidered first as an efficient slutin t the adequacy equatin. With demand respnse as a pssible lever t restre EU EIIs cmpetitiveness, a win-win apprach culd be implemented. MSs shuld encurage develpment f vluntary demand respnse with adequate cmpensatin, by remving regulatry bstacles t the use f demand respnse and putting in place relevant ffers r markets. Capacity mechanisms shuld nt be cnsidered until the EU energy market is fully integrated, in rder t be cst-effective and limit market distrtins; Befre intrducing capacity mechanisms bstacles t investments in new generatin capacity shuld be remved by e.g. simplify permitting. Anther pssibility is t extend the lifetime f existing (semi-)baselad capacity as lng as it is technically and ecnmically viable. Shuld capacity mechanisms be used: It must be accurately demnstrated that this is the best apprach t ensure generatin adequacy while minimising the cst t final cnsumers. The csts f any mechanism shuld be limited nly t the missing mney prtin, which is t be clearly prven, mre particularly the ttal ecnmic impact t final cnsumers; any kind f windfall prfits must be avided. 10

11 Any scheme must be evaluated n a regular basis accrding t its impact n the ttal electricity cst and the schemes t be chsen must prvide the necessary cnditins fr the mst cst effective slutins - like demand side management - t emerge. Demand respnse must be part f the mechanism against adequate payment and treated the same way as generatin assets, taking int accunt the fact that it is a lw carbn slutin. Since capacity mechanisms are a market interventin they have t be temprary and their csts shuld be transparent and traceable. Over all, IE sees as key imprtance that security f supply shuld be ensured with the mst ecnmically efficient apprach, s as nt t threaten internatinal cmpetitiveness f industrial energy cnsumers. FINAL CONCLUSION EU cmpetitiveness plicy including state aid plicy must allw adequate exemptins, cst limits and specific regimes fr industrial energy users, until cmpetitiveness n a glbal level is restred, in rder t: Seriusly address the EU reindustrializatin plicy; Sften the cnsequences f plicies unilaterally impacting at EU level; Fllw the idea n which the EU was funded building an ecnmic cunterweight t ecnmically pwerful regins in the wrld by cnnecting the patchwrk f Eurpean ecnmies int ne single pwerful regin and cnduct a state aid plicy that has the glbal cmpetitiveness f the EU in fcus rather than simply distrtins between MS. Brussels, 12 February 2014 IFIEC Eurpe represents energy intensive industrial cnsumers where energy is a majr cmpnent f perating csts and directly affects cmpetitiveness. 11