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EU's Energy Reforms Hang in Balance Following Coal Subsidy Dispute

The European Union's (EU) energy reforms hit a roadblock following disagreements over coal subsidy extensions among member nations.

Construction machinery working in coal mine
Construction machinery working in coal mine

Unresolved Energy Reform Talks Amid Coal Subsidy Clash

Monday saw a deadlock among EU nations over the proposed energy market regulations. The reforms intended to boost low-carbon power usage met with opposition, particularly concerning an extension of subsidies for coal power plants. The EU energy ministers, who convened in Luxembourg, could not adopt a shared viewpoint on these regulations that also aimed to prevent a recurrence of last year's energy crisis.

Proposal to Extend Coal Subsidies Stirs Controversy

Sweden's last-minute proposal further complicated the discussions. As the current holder of the EU's rotating presidency, Sweden suggested that countries should be permitted to extend the capacity mechanism subsidies for coal power plants. These subsidies aim to incentivize power generators to maintain sufficient standby capacity to prevent blackouts. The Swedish Energy Minister Ebba Busch noted that efforts would persist among EU countries' ambassadors to achieve a consensus.

Resistance Against Coal Subsidies in Light of Climate Goals

Several countries, including Austria, Belgium, Germany, and Luxembourg, disagreed with the coal subsidy proposal. These nations argued that such a move could compromise Europe's commitment to mitigating climate change. The contentious proposal would provisionally allow coal power plants to exceed the CO2 emissions limit if they struggle to attract low-carbon generators and if the European Commission approves this exemption.

High Dependency on Coal Power Stirs Tensions

Poland, which draws about 70% of its power from coal, could extend its support scheme for coal plants beyond 2025 under the proposal. The German Economy and Climate Minister, Robert Habeck, countered this proposal by stating that it is inconsistent with the climate protection targets set by the EU and its member nations.

Stabilizing Power Prices Amid Environmental Concerns

The proposed EU power market reform aims to stabilize and predict power prices by introducing new state-backed renewables and low-carbon nuclear plants into fixed-price contracts for difference. There were ongoing negotiations about details, such as allocating revenues generated by these subsidy schemes. The latest draft of the proposal also suggests that until mid-2024, nations could establish schemes to reclaim windfall revenues from some power plants if power prices spike.

EU countries must now negotiate the final power market overhaul with the EU Parliament to pass the law before the EU parliamentary elections next year.