A sack of dirty coal for Christmas? Threat of coal derogation lingers for Final Electricity Market Design trilogue
Brussels, 13 December 2023
What is Happening:
Today, 13th December, trilogue negotiations on the Electricity Market Design (EMD) reform are expected to come to a conclusion. Co-legislators will have to agree on a long list of outstanding issues such as the design of Contracts for Difference, the Power Purchase Agreements and technical details around energy sharing.
In what are likely to be fast-moving negotiations, Poland (possibly supported by France and Bulgaria) will try to ensure that the so-called “coal derogation”, i.e. Article 64 added by the Council, is kept in. This is an exemption that would allow Member States to continue subsidising old power plants beyond the 2025 deadline agreed in the previous electricity market review. The exemption has been lobbied for since March, but the Parliament refused to include it in its position.
Why is this important:
This reform could be a stepping stone towards the energy market we need: focused on empowering consumers, optimising energy use and stabilising energy prices.
However, the Council is trying to use this as an opportunity to throw a lifeline to Member States that have failed to diversify their energy mix and are still reliant on the capacity provided by uneconomic coal-fired power plants.
This runs counter to the objective of decentralising energy production. Despite the Council text granting the derogation only until the end of 2028, including such a general exemption in the reform would send a signal to other Member States that have failed to address the problems at home, that they can now be rewarded for their inaction. Co-legislators will have to decide on Wednesday what future they choose with the position of the Parliament being pivotal.
Rewarding the inaction of Member States that are failing to diversify and decarbonise their energy mix, by allowing again to extend the life of coal plants sets a dangerous precedent for other countries to follow. We are very disappointed to see that the Council is treating this as a non-issue and countries such as Bulgaria or France are even supporting such a provision upfront. As the fossil fuel phase-out was a key topic discussed at COP28, the onus now is on the European Parliament to defend the EU’s credibility and send a clear signal by rejecting any attempt to give new state aid to coal in the final agreement. – Marta Anczewska, Energy System Policy Expert at CAN Europe
What does CAN Europe propose:
- European Parliament delegation should stand united and reject any attempt to introduce a Coal Derogation to the final compromise text.
- The Council should use the trilogues to improve its position on flexibility needs assessment. The flexibility assessment process for Europe’s future energy system must have adequate oversight, harmonised coordination, and foresight to steer investment. We call on lawmakers to assign assessment to national regulators and ACER, mandate analysis at both the national level and EU-level, and evaluate the progress over a 10 year time horizon. European energy systems quickly need to ramp-up the ability to store and reduce energy, and the incentives are still higher for traditional baseload generation than for the flexibility of resources.
- The focus on the ‘Global Stocktake’ at COP28 and the push for a global fossil fuel phase-out should remind co-legislators about the EU’s own mandate to phase out fossil fuels. The alliances made during EMD negotiations should not compromise our health, climate, and future. Member States who understand the risk of the unchecked impact of such derogation, should actively oppose it and support the Parliament’s mandate.