A French government plan to save hundreds of millions of euros a year by reneging on early solar power contracts it says generate “excessive” profits has caused outrage among investors, who say the move could cripple their businesses, undermine the credibility of the state’s promises and threaten future renewable energy projects.
France is the latest European country to find that the rapid development of solar technology and the collapse in the price of photovoltaic cells has left its government liable for payments over decades far in excess of the cost of new contracts. Spain, Italy and the Czech Republic have faced similar legal tussles in the past.
“Who’s going to have confidence in the state for an offtake agreement on hydrogen production?” asked Xavier Barbaro, founder of renewable energy company Neoen and one of the signatories of a business petition demanding the government abandon its solar energy proposal.
“If you know that in 10 years the tariffs of 2020 will be judged by the costs of 2030, you’ll say, that’s not acceptable . . . it means the state is devaluing its credibility.” Neoen said it owned a modest 19 megawatts of photovoltaic power capacity that could be affected by the resetting of the tariffs.
President Emmanuel Macron’s government, which said it was committed to the “greening” of the French and European economies, launched its attack on the terms of about 800 large photovoltaic power contracts signed between 2006 and 2010 in an amendment to the 2021 draft budget law being debated at the National Assembly this week.
The amendment mentions “excessive profitability” — officials say some investments generate margins of more than 20 per cent — and says tariffs will be cut in such a way that “the return on fixed capital . . . does not exceed a reasonable level given the inherent risks of the investment”.
French officials said they had a duty to save public money, not least so they could finance further investment in renewable energy. They calculated the contract changes would save €400m-€600m a year of the €2bn annual spending on the 235,000 contracts signed in the four years of a photovoltaic investment “bubble”. (Most of the contracts are with individuals and farmers for installations of less than 250kw capacity and are not affected).
The €2bn spent annually produces less than 1 per cent of France’s electricity, but consumes a third of public spending on renewables, the officials said. “It’s not an arbitrary decision,” said one. “Everybody understands the problem of the 2006-10 bubble. In a few years the cost of installing solar panels fell to a quarter of what it had been.
Although the government has said it would defend any legal claims by insisting it was acting “in the public interest”, investors remain unconvinced that the state has the right to break contractual promises. “For the French state in general and this government in particular it’s not a good image,” said Daniel Bour, president of Enerplan, which represents France’s photovoltaic power sector.
An added complication is that even if there was excess profit to be made from contracts up to 2010, much of that was captured by EDF, the state electricity company, and other investors who built the installations at the time and then sold them on to the current owners.
Darko Adamovic, a lawyer with Linklaters in Paris, said: “Investors that have purchased on the secondary markets, those plants have not really been benefiting from those tariffs, as would have been the case had they invested in 2006 as opposed to buying the project in 2013 or 2014.”
Nicolas Jeuffrain, who heads Tenergie, an Aix-en-Provence-based company with 600MW of capacity that bought most of its installations after 2015, said investors were typically making 4-6 per cent returns, not 20 per cent. “The excess profit? It’s gone!” he declares.
Negotiations between the two sides in recent days have yet to succeed, with the government rejecting as insufficient offers from the investors to create a €2bn renewables fund or make other concessions. “All the compromises we’ve proposed have not been accepted so far,” said Enerplan’s Mr Bour.
“There are some companies that could die because of this, so they are going to fight with energy born of desperation,” said Mr Barbaro.
The Ministry of Ecological Transition in Paris said there were no plans to claw back past profits and in response to concerns about companies being bankrupted by the new provisions has said there will be a “safeguard clause” to prevent corporate failures. “No one will go bust as a result of this,” said the official.
Because new tariff subsidies are validated by the European Commission, the government said there was no risk of the state reneging on future contracts. “New renewable energy contacts therefore depend on solid purchase contracts that cannot be challenged,” the amendment says.
France now has about 10GW of installed photovoltaic capacity, and plans to issue tenders to double that in the next five years. The state’s spending on renewables is set to rise to €6bn in 2021, up 25 per cent from this year.
EU and US agree to suspend tariffs in Airbus-Boeing dispute
The EU and US have agreed to suspend punitive tariffs related to their longstanding feud over aircraft subsidies, in the first breakthrough in trade relations since President Joe Biden took office.
The two sides reached a deal after intensive talks, according to people familiar with the discussions, in a sign that the 16-year-old transatlantic trade battle over state aid to Airbus and Boeing could be coming to an end.
The accord, announced by Ursula von der Leyen, European Commission president, means both sides will suspend tariffs linked to the dispute for four months. The duties have hit products ranging far beyond aircraft, encompassing an eclectic array of goods such as US self-propelled shovel loaders, French wine and even US ornamental fish.
In a statement issued after a call with Biden, von der Leyen said: “President Biden and I agreed to suspend all our tariffs imposed in the context of the Airbus-Boeing disputes, both on aircraft and non-aircraft products, for an initial period of four months.
“We both committed to focus on resolving our aircraft disputes, based on the work of our respective trade representatives,” she said.
The goodwill gesture is intended to prepare the ground for negotiations on a permanent solution to the dispute by setting joint rules on permissible aircraft subsidies.
The US trade representative’s office said that a settlement was needed to address challenges posed by new entrants to the aircraft sector from China. Beijing has made it a priority to break the global duopoly that has dominated for decades.
It added that limits on future subsidies and monitoring and enforcement mechanisms would be part of a deal between the EU and US.
A European official said the announcement came “earlier than expected”, given that Biden’s nominated trade representative Katherine Tai has yet to be confirmed. Countering China and setting transatlantic standards for the aircraft industry were keys goal, the official said.
One European diplomat said that four months would be “enough time to focus minds while still being very do-able”.
The deal came a day after the UK and US came to their own arrangement whereby Washington also agreed to suspend punitive tariffs linked to the dispute for four months.
The UK had already unilaterally stopped imposing its own tariffs at the start of this year. EU officials and other trade experts have questioned whether the UK would have had the right to continue to impose them anyway, given its exit from the bloc’s customs union.
Brussels imposed extra tariffs on $4bn of US goods in November, covering a wide range of products including sugarcane molasses, casino tables and fitness machines.
By then the US had already imposed extra duties on $7.5bn of European exports — the result of Washington’s own World Trade Organization victory against aid to Airbus.
Brussels sees today’s step as a breakthrough that can pave the way for broader co-operation on trade after the tensions of the Trump era — tensions that at times threatened to boil over into a full-scale trade war.
The US-EU aircraft subsidies dispute is one of the longest-running cases in WTO history. Both sides have been found over the years to have failed to properly implement WTO panel rulings on illegal subsides.
The battle dates back to 2004, the year after Airbus overtook its US rival in terms of deliveries for the first time. Having earlier brokered an agreement with the EU on state aid in 1992, the US launched a case against subsidies for the European group that dated back to the 1970s. Initially the US claimed that $22bn in illegal funding had been given to Airbus.
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The EU followed up a few months later with a challenge of its own, originally claiming $23bn in illegal aid was offered to Boeing.
The two sides have long remained far apart on the terms of any agreement on how to fund new aircraft development. But with both Airbus and Boeing focused on recovering after the coronavirus pandemic and a hiatus in new commercial aircraft development, industry experts said the timing was right.
The deal will come as a relief to aircraft manufacturers and other businesses on both sides of the Atlantic. French wine producers and Italian cheesemakers have been among those in the vanguard of calls for an end to the dispute. The spirits industry has also been among the US sectors strongly urging a solution.
Airbus welcomed the decision to suspend tariffs. The company said it supports “all necessary actions to create a level-playing field and continues to support a negotiated settlement of this longstanding dispute to avoid lose-lose tariffs”.
Boeing said it hopes the deal would allow for talks to “bring a level playing field to this industry”.
US suspends tariffs on UK exports in Airbus-Boeing trade dispute
The US will temporarily lift punitive tariffs on £550m worth of UK exports such as Scotch whisky and Stilton cheese, imposed as part of a row with the EU over subsidies to Boeing and Airbus, in an attempt to de-escalate one of the longest trade disputes in modern history.
The move follows the UK’s unilateral decision to suspend tariffs against the US from January 1, which took both Brussels and Airbus by surprise. Brussels has disputed that the UK had the right to act unilaterally in a trade dispute between the EU and the US when it has left the bloc.
Liz Truss, UK international trade secretary, said she was delighted that US president Joe Biden had agreed to suspend tariffs on UK goods for four months. The move would help to improve transatlantic relations, she said.
The US trade representative’s office confirmed that it would temporarily suspend the tariffs, to allow time to negotiate on settling the aircraft dispute.
The Johnson government has come under heavy fire over the tariffs in particular from the Scotch whisky industry, whose exports to the US plunged 30 per cent last year.
“The easier it is for Americans to buy a bottle of Macallan, Talisker or Glenmorangie, the more money those producers will have to invest in their businesses, their staff and futures,” Truss said. “Trade equals jobs.”
The US-EU aircraft subsidies dispute is one of the longest-running cases in the World Trade Organization’s history, reflecting the importance of the industry to each side and the intense competition between Boeing and Airbus.
The battle dates back to 2004, the year after Airbus first overtook its US rival in terms of deliveries. Both sides have been found guilty of providing billions in illegal subsidies to their aircraft makers.
Brussels was last year given the green light by the WTO to impose tariffs of up to 25 per cent on $4bn worth of US products, after Washington announced duties on $7.5bn worth of European imports.
Both Boeing and Airbus welcomed any move that could help to bring the two sides together. “We welcome USTR’s (US Trade Representative) decision to suspend tariffs for allowing negotiations to take place,” Airbus said in a statement. “Airbus supports all necessary actions to create a level-playing field and continues to support a negotiated settlement of this longstanding dispute to avoid lose-lose tariffs.”
Boeing said: “We commend this action by the US and UK governments creating an opportunity for serious negotiations to resolve the WTO aircraft dispute. A negotiated settlement will allow the industry to move forward with a genuinely global level playing field for aviation.”
However, Britain’s departure from the EU has raised questions about how effective any UK-US suspension can be. With no precedent to follow, trade lawyers have said it is unclear whether the UK still had a right to impose or suspend tariffs that were granted to the EU.
Whitehall officials insisted the UK had the right to revoke retaliatory tariffs. One individual close to the process said: “This whole issue shows the benefit of being an independent trading nation . . . if we can get this done, it paves the way to a deeper trading relationship with the US and will help free trade deal negotiations.”
Despite this, there appear to be very few signs of progress in the trade talks between the US and UK. In January, White House press secretary Jen Psaki indicated that securing a deal would not be a priority for the Biden administration.
Last month, Biden’s nominated top trade adviser Katherine Tai told senators that she would “review the progress” of the talks that had taken place between the two sides over the previous two and a half years.
Both the EU and the US have long argued for a resolution to the dispute, but have remained far apart on the terms of any agreement on how to fund new aircraft development.
After Biden’s election as US president, there was a feeling in Europe that a deal could be within reach. There has been growing speculation that talks were progressing.
However, in late December, the US further raised tariffs on European goods, specifically targeting French and German products.
The EU has said it is in intensive talks with the US in a bid to quickly secure a deal to remove punitive tariffs.
“We have proposed that both sides agree to suspend tariffs for six months,” a European Commission spokesperson said. “This will help restore confidence and trust, and thus give us the space to come to a comprehensive and durable negotiated solution.”
A US administration official said that while he could not indicate whether there were plans to imminently remove the EU tariffs, the Biden team was continuing to review the dispute. “The goal is to resolve the dispute and create a level playing field,” the official said.
Both Brussels and Washington are keenly aware that the rules need to be set before China becomes a significant competitor to Boeing and Airbus.
China is expected to be the fastest-growing market for commercial aircraft over the coming decades and Beijing has made it a strategic priority to break the global duopoly in an attempt to claim some of that market for Chinese industry. Later this year, China’s Comac is expected to have fully certified its first major commercial aircraft, the C919 single aisle.
FC Barcelona and Real Madrid will be forced to pay back illegal state aid
FC Barcelona and Real Madrid will be forced to pay back millions of euros in illegal state aid after the EU’s highest court ruled Brussels was right to declare that beneficial tax arrangements they enjoyed for a quarter of a century were illegal.
The decision by the European Court of Justice upholds previous rulings by the European Commission and comes as Barcelona, the world’s highest-earning football club, is enduring one of the biggest crises in its history.
This week police arrested the club’s former president, its current chief executive and its general counsel, in connection with a separate legal case ahead of a vote on Sunday to decide its next president. Barcelona, which recorded a loss of €100m last year, also has to contend with a debt pile of more than €1bn.
In 2016 Margrethe Vestager, the EU’s competition chief supremo, ordered four Spanish football clubs to pay back tens of millions of euros received since the 1990s in the form of sweetheart property deals, tax breaks and soft loans.
FC Barcelona subsequently contested the decision before the General Court, the EU’s second-highest tribunal, which annulled the commission’s judgment. However, after a final appeal from Brussels the ECJ ruled in favour of the EU.
In its decision on Thursday — which is final — the ECJ deemed the tax scheme “liable to favour clubs operating as non-profit entities over clubs operating in the form of public limited sports companies”, holding that it could therefore qualify as illegal state aid under EU rules.
The General Court had previously annulled Brussels’ decision over what it said was lack of sufficient evidence that the tax arrangements offered to the four football clubs, which also include CA Osasuna and Athletic Bilbao, were illegal.
But the commission had questioned the court’s “heavy burden of proof” on regulators in its appeal, arguing that a lower tax rate was obviously more favourable than a higher one.
The ECJ argued that the difficulty in assessing the extent of state aid — because of the complexity of tax deductions — did not preclude the commission from banning government practices that it considered gave sports clubs unfair advantages.
It said: “The impossibility of determining, at the time of the adoption of an aid scheme, the exact amount, per tax year, of the advantage actually conferred on each of its beneficiaries, cannot prevent the commission from finding that scheme was capable, from that moment, of conferring an advantage on those beneficiaries.”
The Spanish government said on Thursday it had “absolute respect” for the court’s decision. FC Barcelona and Real Madrid did not immediately respond to requests for comment.
The judgment will be seen as a big win for regulators in Brussels who have for years been trying to stop highly successful commercial clubs from freeriding on the back of taxpayers.
The European Commission said on Thursday it noted “the judgment by the Court of Justice to follow the Commission’s arguments”.
Thursday’s ruling is the second time Brussels has won an appeal of its state aid decisions in recent weeks. Last month judges at the General Court rejected a legal challenge by budget airline Ryanair to state aid given to rivals on discriminatory grounds.
At present Barcelona is dealing with the fallout of what the Spanish media dubs Barçagate — allegations, denied by the club, that it corruptly hired outside groups to defame former president Josep Maria Bartomeu’s adversaries on Facebook.
Bartomeu was temporarily detained by the Catalan police earlier this week. He, the club, and other individuals in the case, which is being investigated by a Barcelona court, have all denied any wrongdoing.
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