Study on energy subsidies for the European Commission

As part of its State of the Energy Union report, the European Commission has released its Study on energy subsidies and other government interventions in the European Union (2022 edition) prepared by Enerdata and its partner Trinomics.

This is the 4^th time Enerdata has performed this study thanks to its research expertise and its expert network.

For the first time in this study, we have been able to discuss our data with each of the Member State Representatives (in Bruxelles or National Energy ministries).

We found out that the overall amount of energy subsidies in EU27 has grown constantly since 2015 (1.8% CAGR), reaching €173 billion in 2020. The share of paid fossil fuel subsidies still weighted €50 billion in 2020 and 2021. However, for the first time, this amount decreased in 2020 (€3 billion fall or -5%) due to the COVID-19 pandemic. We also noticed that many Member States have not specified end-dates for fossil fuel subsidies.

We highlighted that structural changes of the European power mix have triggered the emergence of subsidies for the industry restructuring, such as aids to close coal/lignite power plants and coal mines. Hence, in 2021, the related amount represented 6% (€2.2 billion) of the total fossil fuel subsidies in the EU27.

After studies performed in 2018, 2020 and 2021, the Directorate General for Energy of the European Commission has awarded a new contract to Enerdata and its partner Trinomics to continue the monitoring of energy subsidies in the EU27.

As project leader, Enerdata will collect, monitor, and analyse the evolution of subsidy amounts granted by the EU Member States since 2015, with a particular attention to the years 2020 and 2021. Then, we will study their distribution by sectoral activity, by type of energy or by instrument used (tax reduction, grants, price support, etc.). Moreover, we will highlight the effects of rising energy prices on energy subsidies, and provide an overview of the policies implemented by Member States to phase-out fossil fuels.

The outcomes of this study are essential because it will be used by the European Commission to follow-up on policy developments implemented by the EU Member States to phase-out from fossil fuel subsidies and to comply with governance requirements.

Enerdata and its partner Trinomics carried out a study on energy subsidies, required by the European Commission to release its annual report to the European Parliament

We performed this study thanks to our research capabilities and our network of experts in the EU27 Member States (MS).

We found out that the overall subsidy amount slightly increased since 2015, reaching €176bn in 2019, and we estimated it to €177bn in 2020. Our research also pointed out that energy subsidy reporting is getting more transparent over the past years. However, fossil fuel subsidies (FFS) reporting remains a hurdle, holding back the potential for action on the related issues. In addition, we discovered that no comprehensive FFS phase-out plan has yet been implemented in the MSs’ finance laws.

Our work also revealed significant variations in the interpretation of energy subsidies between the MSs and our methodology, as well as between the content of the national energy and climate plans (NECPs) and our research.

Eventually, we studied energy related COVID-19 response measures in MS Recovery and Resilience Plans (RRPs). We identified more than 500 ‘green’ recovery measures that will contribute directly or indirectly to the MSs clean energy transition, for a total of €237bn investment, including €20.7bn for hydrogen. Those measures aim at decarbonising the transport sector and the building stock and facilitating the production and adoption of renewable energy sources.

Read the "Study on energy subsidies and other government interventions in the European Union", written by Enerdata, part of the Sixth report on the state of the energy union.

After studies performed in 2018 and 2020, the Directorate-General for Energy of the European Commission has awarded a new contract to Enerdata and its partner Trinomics to continue the monitoring of energy subsidies in the EU27. The outcomes of this study are essential because the European Commission intends to use them in their reports on energy subsidies and specifically fossil fuel subsidies to comply with governance requirements.

As project leader, Enerdata will collect, monitor, and analyse the evolution of subsidy amounts granted by the EU Member States since 2008 with a particular attention to the years 2019 and 2020. The study will also analyse the impacts of the COVID-19 pandemic on the subsidy amounts in 2020 to determine whether the evolution observed is structural or cyclical.

Moreover, we will explore the discrepancies of interpretation of the energy subsidies between the definition resulting from our previous work and the definition used by Member States, and provide an overview of the policies implemented by Member States to phase-out fossil fuels.

As part of its State of the Energy Union report, the European Commission has released its analysis of energy subsidies based on the Study on energy costs, taxes and the impact of government interventions on investments prepared by Enerdata and its partners Trinomics, Cambridge Econometrics, VITO and LBST.

Our study highlights that fossil fuels subsidies in the EU27 are stable at around 50 billion euros since 2008 while its Members States have pledged for phasing-out this kind of public support. Our study, which also covered all G20 countries, revealed that China’s fossil fuels subsidies reached no less than 27 billion euros in 2018, slightly above the 26 billion recorded in the United States.

Conversely, subsidies to renewable technologies are still on the rise in the EU27, although we have noticed that the pace of increase slowed down since 2015 due to lower cost and better controlled support policies. The EU27 remains the leader for renewable energy support with 73 billion euros in 2018, far more than amounted recorded in Japan, the UK, the USA, and China.

Thanks to a network of 40 country experts, Enerdata also collected, monitored and analysed detailed information on the levelised cost of electricity (LCOE) and heat (LCOH) in the G20, as well as provided a thorough analysis of energy taxation in all G20 countries.

April 19, 2019

Following the success of the recently published study on energy prices, costs and subsidies in Europe, the Directorate-General for Energy of the European Commission has awarded a contract extending the study to Enerdata and partners Trinomics, Cambridge Econometrics and VITO. The new contract began in April 2019 and last one year.

The project is designed to help build the legislative foundation of the late-2018 regulation titled Governance of the Energy Union and Climate Action, which is available here. The purpose of that regulation is to achieve the EU’s 2030 and long-term climate goals, in line with the Paris Agreement.

We at Enerdata will contribute our expertise on energy subsidies and energy taxation systems, by providing both a reliable theoretical framework and a thorough fact-based analysis. By doing so, Enerdata will help the European Commission define the reporting that Member States should implement to phase out energy subsidies, and especially fossil fuel subsidies. The new project will also extend the geographical scope of the original project, which was limited to the European Union, to also include all G20 countries.