State Aid for Solid Biomass: The Case for Improved Scrutiny

Abstract

This paper asks whether current State aid rules for solid biomass are still fit for purpose and considers the scope for revision of those rules. The paper is structured to present: (i) the rationale and logic of the current State aid regime for support to renewable energy; (ii) the implementation of support for bioenergy deployment since 2005; (iii) the effects of support on markets and the environment; (iv) the relevance of newly adopted policies and policy objectives; and (v) the scope for revision of the rules to better allocate State aid to achieve long-term climate goals. The paper argues that ignoring the external costs of forest biomass use in State aid assessments may lead to a skewed image of its cost-effectiveness as a renewable energy option. This reveals an important discrepancy between the specific way in which biomass support is treated by the current rules and the rationale and objectives of the current State aid regime for renewable energy. Not factoring in external costs of forest biomass may result in an inherently preferential treatment of solid biomass and hinder the development of other – more innovative and cleaner – technologies, which could undermine the principle of technology-neutrality embedded in the Guidelines on State aid for environmental protection and energy (EEAG). This is especially concerning in the case of continuous operating aid for the use of solid biomass as a (close-to) mature technology, which can lead to a lock-in of State aid, of a specific renewable energy technology and of biomass materials for energetic use.