That’s the question lawyers were arguing about in Luxembourg last week. It is a case where Greenpeace is challenging the approval of up to €1.6 billion in aid to Spain’s coal industry.
Spain is a poster child for clean energy. It has revolutionised its power supply, pushing down harmful emissions, reducing the bill for fossil fuel imports and creating thousands of green jobs along the way — all in the space of a few years. Last year, wind power was Spain’s top source of electricity.
But this success story is now under threat. The Spanish government is retroactively changing the rules and cutting back on support for renewables which it says cost too much. At the same time, it continues to defend its support of the country’s uncompetitive coal industry which has swallowed over €24 billion in subsidies since 1990.
Our legal challenge relates to the latest major support scheme for coal, a Royal Decree euphemistically entitled “Restrictions to Guarantee Supply”, which was adopted in 2010. At that time, mine workers in Castille and León were marching in protest against unpaid wages — a major worry for the socialist prime minister, José Luis Rodríguez Zapatero, who hails from the region.
The mines were already receiving direct subsidies, and EU rules prevented a further increase. Instead, the government decided to impose a “production obligation” on 10 power plants which run on Spanish coal, requiring them to continue buying and burning it. In return, the government promised up to €400 million a year in compensation to cover the higher cost of Spanish coal and the purchase of greenhouse gas emission allowances.
Under EU rules, State aid of this kind must be reviewed by the European Commission. The Spanish government argued that the scheme should be approved on the grounds that the 10 coal-fired power plants perform a “service of general economic interest” by keeping the lights on when the wind isn’t blowing. They argued that the scheme also reduces Spain’s dependence on imported energy.
Power companies that generate electricity from other sources — such as renewables, gas or imported coal — were up in arms. So were environmental organisations, including Greenpeace. They pointed out that, far from being at risk of blackouts, Spain’s electricity system suffers from serious overcapacity. Many Spanish gas-fired power plants don’t run at full capacity, because there is not enough demand for electricity — and they offer a much cleaner back-up solution than coal does.
Yet, after intensive lobbying by the Spanish government, the Commission approved the aid without opening an investigation. Its effect was immediate — Spain’s National Energy Commission estimated that the scheme caused a 35% increase in carbon emissions from the electricity sector in 2011.
A number of power companies decided to sue the Commission before the EU’s General Court. Greenpeace applied to join these cases. On Tuesday, the hearing was held in Castelnou Energia v Commission, with Greenpeace Spain intervening.
Castelnou argued some of its gas-fired plants have been put out of action due to unfair competition from subsidised coal. Greenpeace Spain — represented by high-caliber pro bono lawyers — focused on the negative environmental impact of the Spanish scheme. Under EU law the European Commission is required to take environmental requirements into account in all its activities, in order to promote sustainable development. This is called the “integration principle”, and is found in Article 11 of the Treaty on the Functioning of the EU (TFEU). As we put it in court, the Commission should look at the world through “green goggles”.
What does a scheme that orders power plants to burn more coal — and tells them not to worry about pollution as the government will pick up the bill — look like through green goggles? Quite brown, and hardly in line with the “polluter pays principle” — which is also enshrined in the same treaty. The Commission, we told the Court, should at least have opened an investigation to see whether “security of supply” could not be guaranteed in a greener way.
Non-governmental organisations like Greenpeace are only very rarely given an opportunity to argue before the EU courts. This case is therefore a special opportunity to challenge some three-quarters of energy subsidies in the EU that still go towards fossil fuels. Will the judges put on green goggles of their own and side with our case? Expect the ruling some time in mid-2015. The Spanish support scheme will have ended by then — it expires at the end of this year. Hopefully, the Spanish government will not attempt to renew it in some form, avoiding the need for further legal action.
At the same time, Greenpeace is trying to convince the Commission to put on green goggles in another case; the unprecedented State aid that the UK government wants to give to the Hinkley nuclear power plant. Let’s hope that the Commission will do the right thing, and will avoid facing more legal challenges, by us and by others.
Daniel Simons is Legal Counsel for Campaigns and Actions at Greenpeace International.
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