An effective state aid framework will be critical for creating the conditions for an efficient transformation to a low carbon and resource efficient economy. Such transformation will involve significant increases in investment, rapid innovation and creation of new markets across Europe in the next decade.
In this context, E3G’s answer to the European Commission’s draft state aid framework promotes the removal of support to inefficient and polluting industries, and the opening of markets to competition, innovation, new entrants and disruptive business models.
More specifically, we recommend the European Commission to
- Remove the severe restrictions on support for energy efficiency measures. The proposed levels are currently too low to incentivise the necessary investment to ensure European competitiveness, energy security and reduce emissions.
- Secure a level playing field between demand and supply resources in capacity mechanisms. System adequacy can be achieved most cost-effectively through the use of demand side flexibility, which would also prevent reinforcing the dominant market position of incumbents and prolonging harmful subsidies to fossil fuel fired plant.
- Introduce an emissions performance standard preventing subsidies to the most inefficient fossil fuel plant in the guidelines on capacity mechanisms.
- Remove the strict restrictions on development of community scale renewables and participation of new entrants by increasing the threshold for small scale renewables installation.