Thursday, March 30, 2023

Deadbeat Spain breaking Greenie contracts

Renewable energy investors who lost subsidies promised by Spain are heading to a London court to try to claw back $125 million from the government — a decadelong dispute with ramifications for clean energy financing across the European Union.

The outcome will be closely watched by investors after the U.S. passed a new law offering incentives for homegrown green technology. Experts say the Inflation Reduction Act is already drawing clean energy investment away from EU countries like Spain, leaving the 27-nation bloc much less competitive globally.

The European Commission, the EU's executive arm, has proposed its own rules on allowing state aid and incentives for green investment. But those changes would not affect court cases already underway.

The lawsuit in London’s Commercial Court this week involves investors from the Netherlands and Luxembourg who poured millions into a solar plant in southern Spain in 2011. The Spanish government offered subsidies to encourage growth in renewable energy production, then controversially slashed the payments without notice as it cut costs after the 2008 financial crisis.

Spain has been sued internationally more than 50 times over the retroactive changes. It has not paid out despite losing more than 20 cases so far, according to U.N. data on international investment disputes. The EU backs Spain's position.

“Those renewable investors — multibillion-dollar companies — are very concerned about the attitude of Spain and Europe looking forward,” said Nick Cherryman, one of the lawyers leading the case against Spain. “Why should they take risks investing in Europe given the track record?”

Spain now ranks alongside Venezuela and Russia as countries with the most unpaid debts over commercial treaty violations, according to a recent ranking compiled by Nikos Lavranos, a Netherlands-based expert in investment arbitration and EU law.

Most of the cases allege that Spain broke agreements it agreed to honor under the international Energy Charter Treaty, a legally binding agreement between 50 countries to protect companies from unfair government interference in the energy sector.

Environmental campaigners have criticised the treaty for protecting fossil fuel investment because financiers can also sue over policy changes aimed at scaling back polluting projects. However, for Spain, almost all cases relate to renewable energy.

“If you take the bigger picture, the EU is shooting itself in the foot by supporting Spain in this,” Lavranos said. “You cannot trust that they can follow through with their agreements, so I think you do shake investors’ confidence."

He also questioned how leaving investors in the lurch over initiatives to ramp up renewable energy production aligned with recent EU initiatives like the Green New Deal, a goal for carbon neutrality by 2050 and relaxation of subsidy rules.

“It’s very contradictory,” Lavranos said.

In 2013, the investors in Spain brought a case before the World Bank-backed International Centre for Settlement of Investment Disputes, an arbitration body between governments and investors.

Spain in 2018 was ordered to compensate investors over its subsidy changes. Despite being told to pay out more than $1 billion by the international body, Spain has refused, citing EU rules.

Spain’s Ecological Transition Ministry said the payments “may be contrary to EU law and constitute illegal state aid.” When the government is told to make a payout, it says it notifies Brussels but that “Spain cannot pay before the commission’s decision, so it is faithfully complying with its legal obligations.”

The European Commission said the Energy Charter Treaty does not apply in disputes between member states like the Netherlands, Luxembourg and Spain, arguing EU law takes precedence. The commission says the decision to compensate investors over lost Spanish subsidies is still being studied and “the preliminary view is that the arbitration award would constitute state aid.”

Cherryman, the investors' lawyer, said the EU thinks it "should be superior to international treaty law." After waiting for payment for a decade and given the EU position, his team is trying to seize part of a $1 billion settlement awarded to Spain over a 2002 oil spill.

Starting Wednesday, the London court will hear Spain’s arguments that the investors should not be allowed to seize those assets in lieu of compensation they have yet to be paid.

José Ángel Rueda, a Spanish international arbitration lawyer who has represented several renewable energy investors against Spain, said the country's reputation is at stake. Other EU members like Germany and Hungary have paid out after international disputes, opting to maintain a positive image, he said.

“Spain is not like Russia or Venezuela. It was expected to be a serious country. But the awards remain unpaid,” Rueda said. “Investors can see that Spain might not be a reliable state in terms of the rule of law.”

Following years of legal wrangling, the EU is now considering a coordinated withdrawal from the energy treaty, though that would not affect pending disputes.

“It is not possible to modernize the treaty to make it compatible with the objectives of the Paris agreement and the European Green Deal,” Spain's Ecological Transition Ministry said.

The European Commission agreed, saying a withdrawal was “the most pragmatic way forward.”

That might simply nudge investors to look across the Atlantic, Cherryman said.

“America has been nimble, and it introduced very favorable legislation to encourage renewable investment,” he said. “They will respect my investment. Or I can take risk and go into Europe, go into Spain.”

The risk was the loss of more money for renewables, which are “a win for everybody,” Cherryman said. “We all want to see renewables being invested in and we all want a greener environment that is a safer future for our children."


Irish government not very green

In its second report on the issue, the environment watchdog found green criteria is missing from 76 per cent of Government contracts worth over €25,000.

And that just 10 per cent of government spending included GPP criterion in 2021.

Read more: Government 'failing miserably' to hit deep retrofit targets, opposition claims

Ireland’s EPA was given the responsibility of measuring and reporting on GPP in the 2019 Climate Action Plan.

The aim was to encourage public authorities to source goods, services or works that have a reduced environmental impact throughout their life cycle compared to goods, services and works with the same primary function that would otherwise be procured.

But the 2021 report suggests that rather than improving, the government has gone backwards as 26 per cent of 2020 contracts reportedly incorporated GPP.

EPA director general, Laura Burke, said: "It is disappointing there has been a low level of implementation of Green Public Procurement in Government Departments in 2021, even lower than that reported in 2020.

"This is a missed opportunity for Government Departments to purchase more resource efficient and less polluting goods, services and works. "The public sector must play a leadership role.

"Green Public Procurement sends a powerful signal to the marketplace that Ireland’s Government sector is committed to reducing emissions and protecting our environment while saving money over the full lifecycle of goods and services."

According to figures provided by the state’s 18 departments, GPP was in just 8 per cent of the 100 contracts handed out by the Department for Agriculture, 2 per cent for foreign affairs and 4 per cent for Children, Equality, Disability, Integration and Youth.

Green Party-led departments performed markedly better, with 79 per cent of Environment, Climate and Communications deals including GPP and 1,005 for Transport.

The Department for Rural & Community Development also performed well (97 per cent) under Fine Gael Minister Heather Humphreys.

The EPA also found there was no GPP implementation in the priority sectors of food/catering, heating equipment, textile products/ services and lighting.


Berliners vote down referendum on tighter climate goals

Berlin. The referendum for more ambitious climate goals in Berlin has failed. The state election authority announced on Sunday evening that the required minimum number of yes votes had not been reached.

An alliance "Klimaneustart" wanted to achieve a change in the state energy transition law with this referendum. Specifically, Berlin should commit itself to becoming climate neutral by 2030 and not by 2045 as planned.

After counting the votes, the supporters were slightly ahead of the opponents of such a change in the law. However, this was only one requirement for a successful referendum. The second requirement, an approval rate (quorum) of at least 25 percent of all eligible voters, was not met.

According to the preliminary final result, 442,210 yes votes faced 423,418 no votes. The turnout was 35.8 percent. 50.9 percent of voters voted yes, 48.7 percent no. The quorum for a successful referendum was around 608,000 yes votes.


EU's energy summit ends in division over Net Zero

The EU may aspire to become a geopolitical superpower, but arguments over energy at a leaders’ summit this weekend suggested it has enough difficulties keeping its internal affairs in order.

The summit was overshadowed by a dispute over the EU’s law to ban sales of new CO2-emitting cars by 2035. The bloc agreed its combustion engine ban last year as the flagship policy of its Green Deal for cutting carbon emissions. Now, countries with significant car manufacturing industries seem to have woken up to the fact that, in the context of such a huge industrial realignment, 12 years isn’t a very long time.

Germany led the dissent, insisting that combustion engine vehicles should still be allowed if they run on synthetic e-fuels, which are deemed to be carbon-neutral because they are made using captured CO2. After weeks of heated debate, Berlin won out, with EU officials promising on Saturday to adjust the combustion engine ban to exempt cars running on e-fuels.

Critics call the debate irrelevant, saying there is no chance of production capacity for e-fuels coming anywhere near making them a viable alternative for the automotive sector. Similar arguments could be made about electric cars, too —

Manufacturers admit that the technology and infrastructure needed to make electric vehicles as cost-effective, reliable and versatile as traditional cars are still lacking, and that they are often only attractive for customers if supported by subsidies and tax breaks.

Such problems might be overcome with sufficient investment. But the dispute over the combustion engine ban has highlighted friction between national economic interests and international moral pressure over climate change.

Another major issue hanging over the EU summit was a new “Net-Zero Industry Act” proposed by the European Commission, which does not include nuclear energy as a “strategic” technology worthy of investment and incentivisation. European Commission President Ursula von der Leyen admitted that “nuclear can play a role in our decarbonization effort,” but said “only the Net Zero technologies we deem strategic for the future – like solar panels, batteries and electrolysers – will have access to the full advantages and benefits.”

The EU’s refusal to come to terms with nuclear power is a continued source of frustration for nuclear-dependent France and other countries betting on new developments, such as the Czech Republic and Hungary.

Germany, together with Austria, is again at the centre of this bizarre policymaking, due to long-standing and virulent opposition to nuclear power. This opposition previously contributed to the EU becoming hooked on Russian gas; now, it threatens to scupper development of the most viable clean energy source available.

Such a lack of pragmatism may lead to more unintended consequences. The EU’s Commissioner for the Internal Market claims the energy transformation will make the bloc “an industrial leader that exports its products and technologies – not its jobs”. But ballooning imports from China and an unprecedented trade deficit are ominous signs for the EU’s continued industrial competitiveness.

Growing trepidation among car-manufacturing countries about the ban on combustion engines is just one example of concerns about the future viability of European industry. While the EU paints an idealistic picture of a future in which new high-tech industries export from Europe to the world, a lack of pragmatism in its energy transformation could lead to a much harsher reality.




No comments: