EU countries split over proposal to extend subsidies for coal plants

Luxembourg — EU countries failed on Monday to agree on planned new rules for the bloc’s power market, having clashed over a proposal to extend subsidies for coal plants under the reform, and a separate push to expand fixed-price power contracts.

EU energy ministers meeting in Luxembourg ended talks without a joint stance on the reforms that seek to avoid a repeat of last year’s energy crisis, when record-high gas prices left consumers with soaring energy bills.

The talks had been complicated by a late proposal by Sweden, which holds the EU’s rotating presidency, to allow countries to prolong capacity mechanism subsidies for coal power plants that pay generators to keep capacity on standby to avoid blackouts.

EU countries’ ambassadors will take up the negotiations, aiming for a deal this month.

Asked about the coal proposal, Swedish energy minister Ebba Busch said ensuring Poland, which borders Ukraine, had stable power generation could help it support Ukraine with back-up power.

“It has a great importance for the Ukrainian energy system,” she said.

Poland, which gets about 70% of its power from coal, could prolong its support scheme for coal plants, potentially until 2028, under the proposal.

Countries including Austria, Belgium, Germany and Luxembourg had objected, saying the move would undermine Europe’s goals to fight climate change.

The draft proposal would allow existing capacity mechanisms to temporarily waive a CO₂ emissions limit — enabling coal plants to participate — if they fail to attract enough lower-carbon generators, and if the European Commission approved the exemption.

“For some of us, security means capacity markets,” Polish climate minister Anna Moskwa said earlier on Monday.

“It is not compatible with the EU’s and national climate protection targets,” German economy & climate minister Robert Habeck said, adding that though coal plants would continue to operate in countries including Germany, boosting subsidies for them would be a step too far.

Coal is the most CO₂-emitting fossil fuel. Scientists say its use must plummet this decade if the world is to avoid the most severe impacts of climate change.

Stable prices

The proposed EU power market reform aims to make power prices more stable and predictable, by putting new state-backed renewables and low-carbon nuclear plants onto fixed-price contracts for difference.

Ministers struggled to agree whether to limit countries from widely imposing these fixed-price contracts on existing power plants, after some raised concerns that this could distort the EU's single market.

The latest draft proposal would also let countries introduce national schemes, until mid-2024, to recoup windfall revenues from some power plants if power prices spike, a move backed by countries including Greece and Spain, but opposed by energy industry groups.

EU countries must negotiate the final power market upgrade with the EU parliament, with the aim to pass the law before EU parliamentary elections next year.

Reuters