Brussels, 27 June 2012
State Aid: Commission authorises transitional free allocation of greenhouse gas emission allowances for the modernisation of electricity generation installations in Cyprus and Estonia
The European Commission has concluded that certain provisions of Cyprus's and Estonia's development plans for the electricity sector allocating carbon emission trading allowances free of charge are in line with EU state aid rules. The Commission found that the funds (€371 million for Estonia and €194 million for Cyprus) granted will be used to modernise the production infrastructure, diversify the energy mix and to build new installations to replace capacity. This will contribute to liberalising energy markets, reducing greenhouse gas emissions and increasing the security of supply, in line with EU objectives.
Joaquín Almunia, Commission Vice-President in charge of competition policy noted: “The investments foreseen in the Cypriot and Estonian plans will contribute to modernising their electricity generation infrastructure without unduly distorting competition in the internal market. This will allow both Member States to diversify their production sources while reducing greenhouse gas emissions.”
The total market value of the free emission allowances under the Estonian National Plan is €371 million. This support will be used to replace some oil shale generators, to produce more energy from renewable sources and to achieve a more varied energy mix. The market share of any operator will be limited to 40% until 2018, as compared to the incumbent's 95% share in 2007. This will further the liberalisation of Estonian energy markets and stimulate competition.
The total market value of the free emission allowances under the Cypriot National Plan is €194 million. This support will be used to diversify the energy mix by modernising installations in order to use natural gas when it becomes available on the Island and to restore production in the main generation plant that was destroyed in June 2011. Although the Electricity Authority of Cyprus (EAC) is the only beneficiary of the free allowances, the Commission found that they will not increase its market power. Indeed, the liberalisation of the market, the availability of natural gas on the island that will allow investments from private producers and increased electricity generation from renewable sources belonging to other providers will result in gradually decreasing EAC's current market share of 100%.
Article 10c of the EU Emission Trading Directive (Directive 2003/87/EC as amended by Directive 2009/29/EC) allows certain Member States to allocate carbon emission allowances free of charge, provided that they use the funds to modernise their energy system, for example by upgrading the infrastructure, introducing clean technologies and diversifying their energy mix.
Cyprus and Estonia had presented their national investment plan in September 2011. In May 2012, the Commission had already found that carbon allowances granted by Cyprus and Estonia were in line with the requirements laid down in the ETS Directive (see MEMO/12/368). Today's decisions complement these by finding that the public financing measures included in the plans do not distort competition in the Internal Market.
The non-confidential version of the decisions will be made available under the case numbers SA.34250 and SA.33449 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.