New ruse for ignoring Brussels -- German energy subsidies

So anxious is Germany to protect its energy sector from the price pressure of cross border trade that an economy ministry official is suggesting a partial get-out clause from the liberalisation required of Germany under the EU's Internal Energy Market. Under the proposal, wind would join coal in a market niche made immune from EU rules. The proposed niche is for 10% of any EU country's primary energy consumption. The wind lobby, however, says it does not belong in a subsidised ghetto with coal.

So anxious is the German government to protect its energy sector from the price pressures of cross border trade that it is suggesting a partial get-out clause from the market liberalisation required of it as a signatory of the European Union's Internal Energy Market. The aim is to retain subsidies for German coal and the guaranteed minimum prices for renewables, but for a limited market volume, split more or less equally between the two.

With the passing of the EU's Internal Energy Market regulations, all member states agreed to apply free market laws to the energy sector, starting in February 1999. The German economy minister, however, is now suggesting that 10% of the primary energy consumption of each member state should be totally exempt, in an attempt to make a portion of the market immune from EU subsidy rules for ensuring fair competition.

Christel Möller, head of the energy department of the federal economy ministry, aired the 10% idea at the European wind energy conference in Kassel in late September. Initially she failed to mention that the origins of the scheme lay in the problems of getting German coal subsidies authorised by the European Commission. Later, however, she let the cat out of the bag when she said that 10% of Germany's primary energy consumption amounts to about 50 million tonnes of coal equivalent -- and that "20-30 million tonnes of this should be earmarked for renewable energies." The remainder, she admitted, would be reserved for the domestic coal market. Last year, hydro and wind power together accounted for 0.6% of Germany's primary energy consumption, up from 0.5% in 1998.

The scheme has not been welcomed with open arms by the wind lobby. "Germany's minimum price system for renewable energies is not a subsidy and therefore does not fit into this plan, argues Dörte Fouquet who represents the German wind association Bundesverband für Windenergie in Brussels. She also doubts the wisdom of wind being seen to ride on the back of coal subsidies.

Fears for coal

That the proposal stems from coal industry worries is not in doubt. The German government is jittery because the commission has yet to authorise German coal aid for 2000, a not inconsiderable DEM 8.5 billion. Brussels is concerned that German coal mining has failed to show the required "significant" improvement in productivity to qualify for operating aid for its mines. If subsidies have to be returned to the state and miners made redundant, the political consequences for both the federal government and those of the coal mining states of North Rhine Westfalia and Saarland are likely to be considerable.

A September meeting between EU energy commissioner Loyola de Palacio, German economy minister Werner Müller, North Rhine Westfalia premier Wolfgang Clement, and miners trade union head Hubertus Schmoldt failed to reach a new position on the coal subsidies. De Palacio, however, "found the 10% idea interesting and worth thinking about," according to Christel Möller.

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