Feedback on the revision of the EU Energy and Environmental State aid guidelines

Wetlands International asks the European Commission to prevent environmentally harmful subsidies in the Guidelines on State aid for environmental protection and energy (EEAG) that will apply from 2022. In our feedback to the public consultation on the EEAG, we point out that energy projects – particularly hydropower schemes – should comply with the EU’s environmental acquis if they are to receive financial support. This requires greater coherence between the EEAG and environmental and procurement legislation.

Hydropower plants have many environmental impacts, including on river hydrological
regimes, morphological processes and water quality. They negatively affect freshwater ecosystems and riverine habitats. According to the European Environment Agency’s 2020 State of Nature report, hydropower is the most damaging to ecosystems compared to other renewable energy alternatives. The EU Water Framework Directive (WFD) is designed as an instrument to achieve sustainable water use while balancing societal needs such as increased energy demand and environmental needs. The WFD’s provisions are essential to address the pressure of hydropower on European water bodies.

The current EEAG requires compliance with EU environmental laws such as the WFD, however, in practice, we observe that financial support schemes are awarded to projects which contravene the acquis. For instance, current State aid guidelines allow the overdevelopment of small hydropower plants in some countries, particularly in Italy and the EU Candidate countries. DG Competition’s State aid decisions for incentive schemes should more strictly analyse countries’ compliance with environmental laws.

Our key asks to the European Commission concerning the revision of the Guidelines on State aid for environmental protection and energy are:

We ask the Commission to use the opportunity of the EEAG consultation to take measures to prevent environmentally harmful subsidies.
There is no clear provision by which State aid for illegally permitted projects is systematically halted or prevented, and this needs to be changed in the new EEAG.
The EEAG needs to clearly stipulate, that no incentives for hydropower may be provided in countries which are not achieving the goals of the WFD, even for very small plants.
The EEAG needs to clearly state that any energy/environment projects or sectors subject to EC infringement procedures, ongoing investigations that may lead to infringement procedures, or national level court cases related to the environmental and nature Directives may not receive incentive payments until the issue is resolved.
Aside from the environmental acquis, it is important for State aid to be granted only to projects complying with other EU rules, such as on procurement.
There should be no threshold for feed-in tariff schemes for hydropower plants, as providing feed-in tariffs incentivizes overdevelopment of small plants, with high cumulative environmental impacts and a low contribution to electricity generation.

This feedback has been developed jointly with CEE Bankwatch Network.