A total of 15 EU member states spent more on subsidising fossil fuels than renewables in 2020, despite ongoing attempts in the bloc to move towards net-zero, according to a new report from the European Court of Auditors.
Coal plant & emissions. Credit: Kodda / Shutterstock
Credit: Kodda / Shutterstock
While renewable energy subsidies are higher than those of fossil fuels across the EU on average, there are large differences between member states.
The report found that in 2020, 15 of 27 EU member states - Finland, Ireland, Cyprus, Belgium, France, Greece, Romania, Lithuania, Poland, Bulgaria, Sweden, Hungary, Slovakia, Slovenia and Latvia - all spent more than the EU average on subsidising fossil fuels, and more than renewables.
Read more: EU unveils plans for new energy framework to decarbonise gas market
Fossil fuel subsidies have mostly gone to the agricultural, industrial and transportation sectors.
The report however says that the continued use of fossil fuel subsidies can have a distorting effect on markets, and make renewable and clean technology appear more expensive.
In 2009, the G20 called for the phasing out of fossil fuel subsidies by 2020. The European Union and some member states only managed a 2025 commitment date for the phase-out, however.
At present, only three EU nations, Denmark, Italy and Portugal, have performed a comprehensive stocktake of fossil fuel subsidies, twelve stated that they would work on plans to phase them out, and six have included a timeline for doing so.
The auditors also point out that the continued use of 'free allowances' as part of the cap-and-trade EU carbon market, also fall under the definition of fossil fuel subsidies. This is because they mostly pertain top emissions from fossil fuels.
While the allowances were designed to enable sectors such as aviation and heavy industry to remain competitive against non-EU states, much doubt has been cast on their effectiveness, with some arguing that their existence has even hindered the green transition.
Read more: Breton: Nuclear will play "fundamental role" in EU's energy transition
"Free allowances granted to electricity generation... have slowed the uptake of green technologies", the report noted, adding that the Commission should improve the targeting of the permits especially if their use will be continued for another decade.
The auditors also pointed out that subsidies for fossil fuels can have an adverse social effect given time, and create unfair treatment for some sectors, in turn fostering resistance to the green transition such as with France's 'yellow vest' protests.
The report also calls for consistency between the bloc's climate objectives and energy taxation and to uphold the principle of 'polluter pays'. For example, taxes are higher on natural gas than on coal, and some fossil fuels carry significantly lower taxes than renewable-produced energy.
This has led, in practice, to the minimum tax rate being able to be applied to the most heavily polluting sources of energy.
New rules currently being discussed would create new taxes based on environmental performance, end the favourable treatment of diesel over petrol and end the tax exemption of kerosene for passenger flights.
Read more: "A reasonable step forward, 6/10" - ETC's Adair Turner talks COP26
The Commission has said that its current rules do not support the uptake of low-carbon technologies and fail to give legal clarity on some new energy products.
It also added that the minimum taxation rates set in the directive no longer fulfil its initial objective of reducing 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.
Back to Homepage
Back to Energy & Utilities
Back to Politics & Economics