Study shows EUR 2.4 billion given up for coal subsidies annually in the Energy Community

25 March 2019

The Secretariat published today the preliminary results of a study revealing that the Energy Community Contracting Parties support electricity generated from coal with some EUR 2.4 billion of direct and certain types of indirect subsidies annually.[1] The study concludes that with the elimination of state aid via direct subsidies to coal and introduction of a carbon price, not a single coal power plant in the Energy Community would be able to operate without significant losses. The study also shows that without direct and indirect subsidization of electricity generated from coal and other market distortions, in particular cross-subsidization between industry and households, the price of electricity to supply households would need to be increased by some 23% in Kosovo*, 29% in North Macedonia, 31% in Bosnia and Herzegovina, 37% in Montenegro and 49 % in Serbia. Under such conditions, prices for industrial consumers would have to be increased by 36% in Montenegro, 34% in North Macedonia, 30% in Bosnia and Herzegovina, 18% in Serbia, while in Kosovo* they would be decreased by 9%.

Commenting on the results, Director and co-author of the study Janez Kopač said: “The Energy Community Contracting Parties can no longer look away from the consequences of maintaining an unprofitable, inefficient and unsustainable coal-based energy system. On top of the damage done to health, environment and climate, favouring coal distorts the electricity market and raises serious questions when it comes to compliance with state aid rules. It is high time for serious thoughts to be given to at least gradually introducing a carbon pricing mechanism in the Energy Community for the benefit of energy efficiency measures and enhanced renewables deployment.”

The study aims to trigger a wide-reaching and all-encompassing stakeholder discussion based on reliable data in order to allow the Contracting Parties, many of which are standing at a crossroad when it comes to investing in new electricity generation capacities, to make better-informed policy decisions.

At the same time, the Secretariat invites all interested stakeholders to comment on the results of the study and improve the database, in particular concerning the amount of coal electricity production-related direct subsidies in each Contracting Party. The public consultation will run until 25 April 2019. All comments should be submitted to public_consultation@energy-community.org.

The results of the public consultation will be taken into consideration by the Energy Community Secretariat in finalizing the study results.

[1] The calculation is made based on generation and public finance data for 2017, under the assumption of a price for CO2 allowances of 20 EUR/ton.

 

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo declaration of independence.