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The European Commission has approved, under EU State aid rules, a €3 billion Swedish scheme to support carbon capture and storage, CCS aimed at reducing carbon dioxide, CO2 released during the combustion or processing of biomass (so-called biogenic CO2). The measure will contribute to the achievement of Sweden’s climate targets and the EU’s strategic objectives under the European Green Deal, in particular the 2050 climate neutrality goal.
Background
The Commission’s 2022 Guidelines on State aid for climate, environmental protection and energy, CEEAG specify the ways the Commission assesses the compatibility of environmental protection, including climate protection and energy aid measures, according to art.107(3)(c) TFEU. The Guidelines create a flexible, fit-for-purpose enabling framework to support the EU states’ measures in reaching the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas, as well as rules for increased climate protection. They include sections on energy efficiency measures, aid for greenhouse gas emissions removal, clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply, subject to certain conditions.
With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of net zero emissions of greenhouse gases in 2050. The European Climate Law in force since July 2021, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, sets the ground for the ‘Fit for 55′ legislation proposed by the Commission in July 2021.
Recently, the Commission adopted: a) the 2040 Climate Target Communication, which recommended reducing the EU’s net greenhouse gas emissions by 90% by 2040 relative to 1990, to set the path for after 2030 towards climate neutrality by 2050; and b) Industrial Carbon Management strategy, which recognizes the important role that CCS can play in the path to the 2040 climate target and the 2050 climate neutrality objective.
More on “climate law” in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.2021.243.01.0001.01.ENG&toc=OJ%3AL%3A2021%3A243%3ATOC
Guidance for State aid
The Commission has applied the guidelines to assess the compatibility of all notified aid for climate, environmental protection and energy awarded or intended to be awarded since January 2022. All EU member states must amend, where necessary, existing environmental protection and energy aid schemes in order to bring them into line with these guidelines by the end of 2023.
The European Commission formally adopted on 27 January 2022 the new Guidelines on State aid for climate, environmental protection and energy, CEEAG replacing the guidelines that were in force since 2014 (EEAG) and integrate the new objectives of the EU Green Deal of a reduction of 55% net greenhouse gas emissions compared to the 1990 levels by 2030 and of carbon neutrality by 2050. The Commission has estimated that achieving the new 2030 target would require € 390 billion of additional annual investment compared to the levels in 2011-20; these investments shall be borne both by the private sector and public investments.
More on CEEAG in: https://www.insideenergyandenvironment.com/2022/02/the-commission-adopts-its-new-climate-energy-and-environmental-aid-guidelines-ceeag/
The communication explains how the European Commission assesses when national aid for environmental and climate protection may be compatible with the EU State aid rules. Thus, to be compatible, the aid must: a) encourage economic activity; b) incentivize activities that bring environmental benefits in line with the Green Deal objectives; and c) do not harm EU-wide competition and trade.
More in the summary of the Commission guidelines on State aid for climate, environmental protection and energy: https://eur-lex.europa.eu/EN/legal-content/summary/2022-guidelines-on-state-aid-for-climate-environmental-protection-and-energy.html
= Additionally: Regulation 2021/1119 establishing the framework for achieving climate neutrality and amending Regulations No 401/2009 and 2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, pp. 1–17).
= Main reference sources for competition rules in: Consolidated version of the Treaty on the Functioning of the European Union; Part 3 “Union policies and internal actions” and Title VII “Common rules on competition, taxation and approximation of laws”; Ch. 1 “Rules on competition, sect. 2 “Aids granted by States”, art. 107; OJ C 202, 7.6.2016, pp. 91–92.
The Swedish measure
Sweden notified to the Commission of its plans to adopt a €3 billion (SEK 36 billion) scheme to support projects removing biogenic CO2 emissions through permanent CCS. The measure aims to enable CCS as a viable and effective tool to mitigate climate change. This is expected to increase investor confidence in CCS-technology, reduce costs for its future applications and thereby facilitate the development of a CCS value chain in the EU.
Under the scheme, the aid will be awarded through a competitive bidding process, with the first auction expected in 2024. Auctions will be open to companies that: a) carry out an activity in Sweden, emitting biogenic CO2, and b) implement projects with a capacity to capture and store at least 50,000 tones of biogenic CO2 per year.
Under 15-year long contracts, beneficiaries will receive a grant per ton of biogenic CO2 that is permanently stored. The aid received will be adjusted taking into account possible revenues that might stem from the projects (e.g., thanks to voluntary carbon removal certificates), as well as other public support received for the same project.
The scheme will run until the end of 2028; by enabling capture and storage of significant amounts of biogenic CO2, the scheme will contribute to Sweden’s efforts to reduce its greenhouse gas emissions by 85% by 2045 compared to the 1990 level. It will also help Sweden and the EU to meet the objective of achieving climate neutrality by 2050.
Reference to: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3583
The Commission approved the Swedish measure under EU State aid rules; the Commission found that:
= The scheme was necessary and appropriate to incentivize investments in projects concerning capture and storage of biogenic CO2 in Sweden and thereby contributes to the national and EU climate targets.
= The scheme has had an “incentive effect”, as potential beneficiaries would not carry out the investments in biogenic CCS projects without the public support.
= The scheme has a limited impact on competition and trade within the EU. In particular, the aid is proportionate and any negative effect on competition and trade in the EU will be limited in view of the design of the measure, which will notably ensure that the aid amount is kept to the minimum.
= The scheme would be subject to an ex-post evaluation, which will verify, among other things, the effectiveness of the competitive bidding process.
Citation
“This €3 billion scheme will enable Sweden to capture and to permanently store a significant amount of carbon dioxide generated by biomass combustion or processing. It will help Sweden and the EU to achieve their ambitious target of climate neutrality by 2050, while ensuring that competition distortions are kept to the minimum”.
Margrethe Vestager, Executive Vice-President in charge of EU competition policy
Source: Commission press release https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3583