European Commission Approves UK Green Deal For Energy Efficiency Measures

The European Commission has found that the public support of £600 million (approximately €700 million) to be granted by the UK in the context of its ‘Green Deal’ policy is in line with EU state aid rules. The ‘Green Deal’ is the central UK Government policy for improving the energy efficiency of buildings. Different State bodies and the UK Green Investment Bank (GIB) will provide support in various forms. These measures will support energy efficiency, in line with the EU’s energy and climate change objectives, while keeping distortions of competition to an acceptable minimum.

Under the ‘Green Deal’, private companies may offer upfront energy efficiency investments to citizens and then recoup payments through energy bills. Clients would face no upfront costs as they would only pay a monthly charge added to their electricity bill. Thereby, they would only pay for such an investment as long as they remain in the building concerned. When they move out, the new occupant would continue the down-payment. The scheme was designed in compliance with the “Golden Rule” of the Green Deal that specifies that any charge created by an investment must be less than the expected savings. Different State bodies and the UK Green Investment Bank (GIB) would provide financial support via a special financing vehicle.

The Commission has found that the scheme is aimed at an objective of common interest, namely improving energy efficiency, and that it is well-designed, making a significant contribution towards delivering this objective. Moreover, since most of the advantages derived from the scheme are passed on to end-consumers, the potential distortions of competition are limited as compared to the environmental benefits. Finally, the UK authorities have addressed initial concerns raised by the Commission about GIB’s involvement in the Green Deal by committing to ensure that GIB will withdraw from this market to the extent that private investors step in, thereby preserving competition.

As a result, the positive effects of the measure in terms of promoting and increasing energy efficiency clearly outweigh any potential distortions of competition brought about by the state support.

Commission Vice President Joaquín Almunia, in charge of competition policy, says: “The UK Green Deal allows consumers and businesses to improve the energy efficiency of their buildings without making huge upfront investments. This is another example of how our policy of state aid control can support private investment in energy saving and enhance competition at the same time.”

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