The International Network
for Sustainable Energy

v. December 2006

Introduction
Throughout the world, energy is one of the most subsidised sectors. Nuclear power is based on subsidies for its introduction, waste management, development, etc., and various kinds of renewable energy are often subsidised to support their introduction. Also fosil fuels and electricity are subsidised for specific purposes in a number of contries, such as the German coal subsidy to maintain an uneconomic domestic coal production, or subsidies to reduce the energy costs for certain parts of the population or for the industry. Even energy efficiency is sometimes subsidised to increase its use among consumsers that cannot afford the investment; but will be better off with more efficient houses and appliances.

Energy subsidies are often decisive for investments in energy supply or energy efficiency,
but the large use of subsidies in energy for many different purposes make their total effect difficult to assess.

Most countries agree that subsidies should be given only with clear purposes, and be regularly reviewed to evaluate if the subsidies are adequate and necessary for the purpose. EU countries, European countries in the UN - Economic Commission for Europe, and the countries within the UN have agreed to limit harmful energy subsidies. Specifically they have agreed:
-EU countries have accepted that their subsidies are limited by the EU Commission's guidelines for subsidies, with some exceptions for nuclear power.
-the UN-ECE countries, including all EU countries, agreed to phase out environmental harmful energy subsidies at the UN-ECE environmental ministers meeting in June 1998.
-most countries of the world have agreed at the UN World Summit on Sustainable Development in 2002 to the Johannesburg Plan of Implementation that call for a phase out energy subsidies that inhibit sustainable development.

In spite of this, there are still many energy subsidies that are harmful to the environment and that make people take decisions that are counter-productive to a sustainable development in energy. This ranges from German coal subsidies, over a range of subsidies for nuclear power to reduced VAT for fossil fuel and electricity in some countries, where energy efficiency and renewable energy are charged a higher VAT rate.

It is often difficult to get an overview of the energy subsidies in a country and to evaluate which of them are harmful to the environment. This is partly because definitions of subsidies vary, but also because of problems to get adequate the information about subsidies. A number of analysis of energy subsidies are:

-The European Environmental Agency made in 2004 an overview assessment of energy subsidies in the 15 ”old” EU countries

-The EU Commission maintains an overview of state aid in its ”Scoreboard for State Aid”, including state aid for coal, with annual updates.

-Greenpeace publíshed an overview of energy subsidies in 2004 in the report ”The EU’s Energy Support Programmes: Promoting Sustainability or Pollution?”

-OECD and its International Energy Agency (IEA) have done substantial studies on subsidies, see www.oecd.org and www.iae.org.

An importent collection of links to NGO initiatives to monitor subsidies in energy is is Earthtrack's subsidy pages

Energy subsidies in EU
The most important current energy subsidies in the EU and EU countries are:

Nuclear subsidies
Nuclear reaserch and development received the largest energy-related support from EU's research and development program, the 7th Framework Program for RTD
Nuclear power receives loan via the Euratom loan facility
Most countries support research and development in nuclear power
Nuclear power receives state support for decommissioning and waste management in some EU countries. The UK government has received permission to give decommissioning support to UK nuclear power plants in the order of 60 billion £, and also other countries give this support
-Nuclear power projects receive preferential loan from some publicly owned banks, such as the low-interest loan of 1.95 bill. € by Beyrische Landesbank and others for the new Finnish nuclear power reactor (EREF).
-Owners of nuclear power situated in Germany and France are allowed to use nuclrear decommissioning funds for investments, including purchase of competitors, thereby distorting the internal electricity market
-nuclear power plant owners have limited liabilities because of the Vienna and Paris conventions. This reduces their insurance premiums drastically compared with a situation with full liability for nuclear power.

Coal subsidies
Germany and 7 other EU countries are subsidizing domestic coal production. 2003-2005 this state support totaled 6.58 bill. € of which 3.51 bill. € was for operating assistance while the rest was for closures related costs. This is amount is slightly lower for the period 2006-2010, and no decision is made regarding continuation after 2010. The support is approved by the EU Commission under the EU state aid rules.(State Aid Scoreboard)
Coal fired power plants has received and continue to receive state aid in the form of EU structural funds and EiB loans.
Some coal-fired power plants have received state support to cover ”stranded investments” with the introduction of the competitive electricity market, e.g. Danish power companies.

Gas subsidies
Gas networks have received and continue to receive subsidies from EU in the form of EiB loans and in some cases structural funds for construction, network expansion, etc. In addition, international gas supply infrastructure and security of gas supply is supported by EU's foreign policies, thereby creating an advantage for gas supply.

Renewable Energy Subsidies
Renewable Energy is supported by subsidies from EU's research and development program, the 7th RTD program
The Intelligent Energy for Europe program support the introduction of renewable energy and energy efficiency.
EiB give loans for renewable energy and has a target that 14% of energy lending should be for renewables energy. It has difficulties to reach the this target. (Bankwatch)
Structural funds can be used for renewable energy and energy efficiency. Until now renewable energy projects have only used a small fraction of the structural funds, according to INFORSE-Europe's structural fund evaluation
Many countries give support for renewable energy, in the form of investment subsidies, tax breaks, etc.
Many countries demand that electricity from certain renewable installations receive a higher price than other electricity or that it receives a fixed price, independent of electricity price fluctuations.
(See an overview of support for renewables in EU countries at http://www.eujapan.com/europe/energy.html.)

Watching Energy Subsidies
INFORSE-Europe together with European Renewable Energy Federation (EREF) and others are starting an initiative to map energy subsidies, primarily in EU. This web page is the first result of the initiative. It will gradully be expanded.

Comments and suggestions are welcome to ove@inforse.org.

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