Coal plants must pay back €400 million in unlawful subsidies from Spanish government

Environmental lawyers are calling on the European Commission to order coal operators in Spain to pay back millions in subsidies received since 2007 to the Spanish government, because the payouts were against EU law. If the Commission agrees, the operators would have to pay back a total of €0.44bn.

Spain’s coal subsidies – ultimately paid for by energy customers – have been under investigation since November 2017. The Commission is deciding whether they comply with EU State aid rules. Lawyers from IIDMA and ClientEarth are now submitting arguments to help the Commission reach its decision.

Under EU law, governments have to get approval from the Commission if they want to grant subsidies – which Spain failed to do. The subsidies also give an unfair advantage to coal plants: plant operators must comply with pollution laws with no extra funding from the state.

The Commission launched an investigation in November into whether Spanish coal subsidies to reduce sulphur dioxide emissions (framed as “environmental incentives”) were granted in accordance with EU law.

Environmental lawyers IIDMA and ClientEarth have filed a submission supporting the Commission’s initial findings that the subsidies amount to unlawful State aid. They say the only correct legal response is for the Commission to require the operators to pay back the subsidies in full.

The aid was only applicable to coal plants and was therefore not available to cleaner technologies like renewable energy, battery storage, demand response or interconnection.  Health impact figures cited are from IIDMA’s report A Dark Outlook – The impacts on health of coal-fired power plants in Spain during 2014

ClientEarth energy lawyer Sam Bright said: “Legally speaking, operators of polluting coal plants should pay to prevent their own pollution – those costs should not be passed on to the customer. “Coal operators across Europe pay from their own pockets to make sure their plants meet pollution limits. Spanish operators are subject to the same rules and should be treated no differently. These subsidies need to be paid back, and an example set.

IIDMA lawyer Carlota Ruiz-Bautista said: “These subsidies violate EU law. The Spanish government knows that these so-called environmental incentives do not comply with EU State aid rules. The Commission must order operators to pay back the money they received from the Spanish government.

“Supporting coal is not in line with international commitments to protect people’s health and the environment. Spain is lagging behind: it needs to get on board with the coal phaseout.”

In 2014, emissions of nitrogen oxides, sulphur dioxide and dust from Spanish coal plants were responsible for more than 700 early deaths and the costs of the health impacts are estimated at up to €1.7bn.  Beyond the human health impacts, the plants are significant contributors to climate change and environmental damage.

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