EU preparing to ‘throw billions’ at big oil firms

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Billions of EU taxpayers’ money have been pumped into the fossil fuel industry over the last five years, environmentalists have warned in a report published ahead of a European Parliament vote on the Union’s proposed €5 billion economic recovery plan.

The Green group in the EU assembly has called on MEPs to abide by a Parliament resolution adopted in November 2007, which calls for public funding for fossil fuel projects to be halted. 

The EU’s proposed economic recovery plan, which was approved by the bloc’s leaders at their March summit, has earmarked €3.98 billion for energy projects, with €2.5 billion going on gas interconnectors and carbon capture and storage (CCS; see EURACTIV LinksDossier).

CCS is considered crucial to reducing CO2 emissions from the coal-fired power stations on which the world is expected to continue to rely for decades to come. Moreover, the need to build more gas interconnectors was highlighted recently by the gas dispute between Russia and Ukraine, which left millions of Central and East Europeans in the cold in the heart of winter.

A report by environmental NGO Friends of the Earth Europe argues, however, that enough EU money has been spent on projects involving large oil and gas companies already. The most significant contribution was European Investment Bank (EIB) loans for the production and primary processing of fossil fuels, which amounted to €6.782 million over the past five years, according to the report.

The research also looked at public spending on fossil fuels in three member states: France, the UK and the Netherlands. Most of this money went to export guarantees, averaging €580 million in the UK, €390 million in France and €460 million in the Netherlands. 

The Netherlands stood out, with high expenditure on research and development. Most of this went to CCS and other clean fossil-fuel technologies.

Renewables instead

Friends of the Earth Europe (FoEE) argued that Parliament should not endorse the recovery plan as it is, because the funding would come on top of the billions that fossil fuel companies are already receiving. Almost all of the EIB loans to fossil fuels were provided to gas-related activities, mostly for the construction of pipelines and transmission grids, the NGO argued, which is where the recovery funds are targeted.

Moreover, the environmentalists claimed that taxpayers’ money should not be spent on CCS.

“Oil and gas companies should not receive taxpayers’ money to use for unproven technology such as CCS while they continue to make billions of euros of profit each year and invest their own capital in dirty projects like oil sands, which produce three times more emissions than conventional oil,” FoEE’s international corporate campaigner Paul De Clerck said.

Darek Urbaniak, the NGO’s extractives industry campaign coordinator, told EURACTIV that CCS contradicts the EU’s climate policy. “It doesn’t solve the problem, but leaves it to future generations,” he said.

Urbaniak added that the CCS studies on which the Commission had based its evaluation were carried out by research institutes financed by the same big oil companies whose very interests are at stake.

The environmentalists are arguing that if the recovery plan is to achieve its objective of stimulating job growth, the money should be spent on renewable energies. The original Commission proposal promised funding only for offshore wind farms, but scrapped plans to support renewables and smart cities.

These were among the key demands of MEPs, who are tomorrow expected to vote in support of a compromise struck with the Czech EU Presidency. 

The compromise offers the Commission the option of proposing to use recovery money for energy efficiency and renewable energy projects should its March 2010 progress report show that the priority projects are at serious risk of not being implemented.

Funds confirmed

The financing of the economic recovery plan was finally sorted out last week (27 April) after much confusion. The Commission had originally wanted to use unspent EU funding originally earmarked for the 2008 budget, until it emerged that as the budget was closed, these were no longer available (EURACTIV 19/02/09).

For the energy expenditure, the money was found by increasing the budget for agricultural and environment measures by €2 billion. The remaining €1.98 billion will come from a compensation mechanism, using remaining margins in the 2009 and 2010 budgets. If necessary, the EU is prepared to look at the margins of the 2011 budget as well.

Background

On 28 January, the European Commission tabled a five billion euro recovery plan targeted mainly at clean energy projects and the deployment of broadband Internet connections in rural areas (EURACTIV 29/01/09).

Under the plans, a total of €3.5 billion (later increased to €3.98 billion) would be devoted to clean coal and offshore windfarms, while €1 billion will support broadband Internet. A further €500 million is earmarked for tackling new agricultural challenges, such as climate change, renewable energy, water management and restructuring the dairy sector.

EU countries attacked the Commission's plan for a variety of reasons. Some Western countries complained that projects for "smart cities" had been dropped, while Bulgaria, the country worst hit by the recent gas crisis, found its own modest allocation "abnormal" (EURACTIV 04/02/09). An agreement in the Council was finally clinched at the March 2009 EU summit in Brussels (EURACTIV 20/03/09). 

The Parliament, however, called for any money not committed before 1 September 2010 to be "immediately be redirected to projects in the field of energy efficiency and renewable energies". They argued that projects such as carbon capture and storage (CCS) are unlikely to reach a stage of maturity whereby they could absorb all the investment by that time (EURACTIV 02/04/09).

The compromise struck between the institutions on 16 April allows the Commission to propose the use of recovery money that is not committed by the end of 2010 for energy-efficiency and renewables projects. However, the EU executive must prove in a report that priority projects will not be implemented (EURACTIV 17/04/09). The report is due in March 2010.

Timeline

  • 6 May: Parliament to vote on energy projects in the economic recovery plan.
  • March 2010: Commission to publish progress report.

Further Reading

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