Oil Report

Controversy mounts as EU plans aid for coal power

* EU fine-tuning state aid rules for coal power plants

* Critics say subsidies would undermine EU climate goals

BRUSSELS, April 1 (Reuters) - The European Union is fine-tuning plans to allow millions of euros of state subsidies for new coal-fired power plants, a policy that campaigners say undermines EU environmental ambitions.

For four years from January 2013, EU governments can provide up to 15 percent of the cost of new coal-fired plants, provided they have the potential to retrofit carbon-trapping technology some time in the future, a leaked EU document shows. A European Commission spokesman said the EC was discussing the issue internally, but he declined to comment further.

The move comes amid high tensions over coal’s climate impact, with the United States and Britain threatening to withhold support for a $3.75 billion World Bank loan for a coal-fired power plant in South Africa. [ID:nN0693420]

To qualify for aid, the European plants would have to be capable of retrofitting carbon capture and storage (CCS) technology, a cutting-edge technique to trap carbon dioxide emissions and lock them in underground caverns.

But the costly infrastructure does not have to be built. The plants must merely be “CCS ready”.

“CCS ready means that ... suitable storage sites are available and set aside; transport facilities are technically and economically feasible and it is technically and economically feasible to retrofit for CO2 capture,” reads the document, seen by Reuters on Thursday.

Campaigners say in practice that might mean nothing more than having an empty field alongside the plant, as the rules imply no legal commitment.


Details of the plan have only just emerged, despite the principle being agreed in December 2008 to win Germany’s support for laws in the EU’s “Climate and Energy Package”.

“This is the worst thing to come out of that deal in 2008, and results from a last-minute push by (German Chancellor) Angela Merkel,” said Sanjeev Kumar of green think tank E3G.

“This goes against everything the EU stands for on climate, but there is still a chance for governments to kill this.”

European governments are already reviewing their support for new coal-fired plants amid public fears of climate change and protests in Britain, Germany and the Netherlands.

“This is something the UK opposed at the time and is not something that we in the UK would make use of,” a spokeswoman for Britain’s Department of Energy and Climate Change said.

The British government’s “framework for clean coal” aims to deliver four commercial-scale CCS demonstrations and ensure that no new coal-fired power stations are built in Britain without CCS, she added.

Germany is reviewing its energy strategy, and if it chooses to soften its planned phase-out of nuclear power then new coal plants might not be such a priority as in 2008, said a diplomat familiar with the dossier.

One reason state aid can be accepted in the EU is if it improves environmental protection, but environmentalists question whether even the most efficient coal plants meet that criterion. (Reporting by Pete Harrison; Editing by Keiron Henderson)