In 2018, the European Union established a monitoring and reporting system to ensure member states could achieve climate targets. These targets had been set four years earlier, when the EU pledged to cut greenhouse gases by at least 40 per cent.

An important aspect of this was the phasing out “without delay” of environmentally harmful subsidies to fossil fuels. Member states had already committed to this in 2013, but there had been little action. National Energy and Climate Plans (NECPs) were the instrument devised to reinvigorate the process and encourage countries to take steps to achieve the goals they had committed themselves to.

Generous room for manoeuvre

The NECPs were to map out two sets of policies: till 2030 and 2050. “If applicable”, each member state was obliged to include national objectives to phase out energy subsidies, in particular for fossil fuels. The Commission would then present an annual report to the European Parliament and Council on member states’ progress towards phasing out subsidies.

However, wildly differing interpretations have emerged from the NECP drafts that national governments have submitted. The Commission, which is charged with critiquing the plans and sending them back for revision, has concluded that much improvement is needed.

“It is important that all Member States indicate in the final NECPs their future efforts and the timelines to phase out fossil fuel subsidies,” it wrote in one appraisal.

Only Estonia, Ireland and Italy were spared criticism, the latter even praised for its “good practice” of including a detailed analysis of energy subsidies. Even if Italy is a rare exception, it gave no calendar date for phasing out subsidies.

No end in sight for subsidies

Investigate Europe has analysed 22 of the final versions of the NECPs and has come to these three key conclusions.

• Member states clearly do not know what they are talking about — or pretend not to know — when it comes to fossil fuel subsidies. After its evaluation of all the draft NECPs, the Commission urged 25 of the by now 27 member states (Britain had, by this point, voted to leave the European Union) to submit detailed lists of their fossil fuel subsidies. Still, of the 22 analysed, at least 16 contained incomplete lists of subsidies.

• Some member states openly stated that they do not plan to phase out fossil fuel subsidies.

• No NECP presents a detailed timeline for the phasing out of subsidies.

Too little, too late

Member states had until the end of 2019 to hand in their final NECPs, but many missed the deadline. By mid-March, the following year’s reports from France, Germany, Ireland, Luxembourg, Romania, Spain and the UK (which was still a member at the time) were still missing.

Germany needed until mid-June to submit its final NECP but it does not include any action plan for phasing out subsidies. Instead, it says it needs more time to study a scientific evaluation of its fossil fuel subsidies.

Phasing out fossils?

In the final NECP of Austria, the government announces its intention to present “a list of incentives and subsidies that conflict with climate and energy goals, including the associated implications for Austria as a business location”. Such a list should have been in the NECP as part of Austria’s subsidy phase-out plan.

While most EU member states have yet to start subsidy phase-outs, many claim a fuzzy understanding of what actually constitutes a fossil fuel subsidy.

• In its NECP, Croatia claims that most of its fossil fuel subsidies could even foster energy efficiency and renewables.

• Bulgaria says no fossil fuel subsidies exist in the country.

• Poland describes how instead of a phase out, subsidies will be paid for many years to come, arguing coal generates much of the country’s electricity.

• Estonia openly declares it has no intention of phasing out subsidies.

• So too does Malta: “Bearing in mind Malta’s specificities, there are no plans to phase out any energy subsidies at this particular juncture,” it writes in its NECP.

State of denial

At times it seems some countries, like the Netherlands, are playing semantic word games (only made possible because there is no universal definition of what constitutes a subsidy). For ten years or more, it has been debating the issue with many august bodies, laying bare the true extent of the country’s multi-billion euro fossil subsidy regime. However, successive Dutch government ministers have rejected the findings that point to these subsidies, stating they do not exist, full stop. Or they argue that subsidies are designed not to benefit the fossil sector, but to stimulate the economy, innovation and competitiveness.

“It’s frustrating,” says GroenLinks MP Tom van der Lee. “The line of argument was always ‘we don’t give subsidies’. But in fact, it’s also a way of bypassing the discussion.” 

A shining star (relatively speaking)

By contrast, Italy, which reported its fossil fuel subsidies comprehensively, is one of the few to mention phase-out plans. But even these are vague, with no detailed timeline.

When the Five Star Movement came to power in June 2018, it announced its intention to eliminate support to fossil. It took two years to begin the work, with the creation of a new committee for ecological transition. Members represent different sectors: agriculture, environment, economic development and finance. They convened just weeks before the Covid-19 lockdown, in February 2020. Since then civil servants have been meeting online to finalise a list of subsidies harmful to the environment. Italy intends to then convert these into “positive subsidies”. The list will form part of the next budget, due in September 2020. One committee  member explained, “The government’s plan is not to cancel those subsidies, but to try to find a way to turn this money into the future, into green investments.”

Currently, three proposals are being looked at, but others will follow:

• Increase the diesel tax in two phases, over five and ten years, to arrive at the petrol tax level. Diesel tax breaks currently amount to €5.1 billion,

• Decrease the level of petrol tax to the level of diesel tax, or…(and this is the option preferred by the Ministry of Finance):

• Convert the €5 billion into incentives for electric cars.

Commission timeline

In September 2020, the Commission is expected to present a European climate law, making binding CO₂targets by 2030, with a reduction target of up to 55 per cent of 1990 levels. It will then carefully look at each National Energy and Climate Plan and make concrete recommendations to national governments on how to improve them. If the schedule sticks, the Commission will be able to start checking member states’ fiscal systems on progress towards achieving the climate targets from June 2021.

Edited by Paul Anderson