EUROPEAN COMMISSION OPENS IN-DEPTH INVESTIGATION INTO STATE AID FOR BIOMETHANE
Munich, March 5, 2024
In response to the annulment by the EU General Court (Case T-626/20 – Landwärme v Commission), the European Commission has officially opened an in-depth investigation into Sweden’s state aid scheme for biomethane. Legal action by Landwärme, a leading European biomethane trader, triggered this investigation, exposing concerns of double subsidization practices that disrupt fair market conditions and hinder the goals of the European Green Deal.
The legal proceedings originated from the Swedish state aid scheme allowing recipients to claim subsidies alongside aid from other EU Member States such as Denmark and leading to an uneven playing field in the European biomethane market. This distortion harmed the biogas and biomethane industry in both Sweden and the EU and posed a threat to the EU's ambition to achieve climate neutrality by 2050.
As a leading biomethane trader in Europe, Landwärme strongly supports state aid schemes promoting the expansion of biomethane production. Landwärme views both the Swedish and the Danish schemes as crucial contributors to scaling up the EU biomethane production. Advocating for collaborative efforts for sustainability and energy security through biomethane production and usage across the EU, Landwärme welcomes the European Commission’s in-depth investigation. Expressing hope for a swift solution, Landwärme emphasizes the need for additional measures in Sweden to prevent potential market distortions.
The issue traces back to 2020 when the European Commission approved Sweden’s renewal of two parallel state aid schemes for biomethane for heating and fuel without considering the overlap with the support granted in other EU Member States. The European Commission’s oversight led to overcompensation, creating an environment where biomethane could benefit from multiple subsidies, when for example combined with the Danish state aid: biomethane produced and subsidized in other EU Member States was eligible for an additional subsidy when exported to and utilized in Sweden.
The uncontrolled practice resulted in a surge of biomethane imports to Sweden, causing local producers to be edged out of the market. Biomethane imports to Sweden rapidly grew from 0.2 TWh in 2015 to 2.5 TWh in 2021. About 95 % of these quantities came from Denmark1, exemplifying the severity of the interplay between these two schemes in particular. The remaining 5 % of imports and whether they have already received production subsidy in the country of origin is yet subject to clarification. Despite significant investments in Sweden, biomethane production was not able to expand, disadvantaging Swedish taxpayers.
Similar challenges are observed across the EU, where subsidized biomethane is flooding markets. Due to the aid received in other EU Member States, some biomethane producers have been able to offer their biomethane at lower prices, forcing regional producers and producers of biomethane without subsidies out of the market.
In 2022, the EU General Court ruled that fair market conditions prevail and potential distortions resulting from an uncontrolled interplay of different schemes of different EU Member States are to be excluded. As a result of this ruling the European Commission is to conduct an in-depth investigation into the matter, which the Commission has now opened.
In light of these developments, Landwärme’s CEO Zoltan Elek emphasizes the importance of creating a system that is well thought through: "We believe that ensuring fair market conditions and a procompetitive development of the EU biomethane market is crucial for the benefit of all producers and, ultimately, consumers. With the EU General Court's confirmation, the responsibility lies with the European Commission and Sweden to prevent overlaps between different state aid schemes. Opening this in-depth investigation marks the first step in re-establishing a level playing field in the biomethane sector.”
At the same time, it should be noted that Denmark is also currently in the process of revising its state aid scheme. Elek points out the timing of things: “Effective oversight should apply to both the current Danish scheme as well as the newly planned tender system.” Without adjustments of both Danish schemes, the Danish state aid scheme could potentially interact with state aid support from other Member States. This interplay could also have adverse effects on Danish taxpayers as the subsidized biomethane from Denmark may be credited to the share of energy from renewable sources of the Member States in which it is exported and consumed. “We believe it is imperative that both the exporting as well as the importing Member States establish effective additional control measures to exclude the current distortions,” Elek concludes.
The Landwärme CEO expresses the company’s readiness to support where possible: “We are looking forward to cooperating with the European Commission and invite all stakeholders to contribute to this crucial initiative to ensure a functioning European market”.
For further information, please contact
Zoltan Elek | Chief Executive Officer | netzwerk@landwaerme.de
About Landwärme
The Landwärme group is a leading biomethane trader in Germany and Europe. We supply hundreds of energy providers and public utility companies with biomethane for use in energy, heating, and transportation. It has always been a pioneer in the EU biomethane sector and helped actively shape the market as an independent and owner-managed company by promoting and fostering the cross-border trade with biomethane. The company was founded in 2007 with its headquarters in Munich and branch offices in Berlin and Dortmund, Germany as well as in Budapest, Hungary.
More information can be found at: www.landwaerme.de