Greece makes U-turn on energy policy, climate ambition

The Greek government is expected to once again revise the National Climate and Energy Plan (NECP) before it submits the final version to the European Commission in the following months.

The latest public statements by officials from the Ministry of Environment and Energy indicated a U-turn in Greece’s national energy and climate policy.

A few days ago it became one of just three European Union member states that rejected the European Commission’s intermediate 2040 climate proposal for a reduction of greenhouse gas emissions by 90%. Greek officials called for more emphasis on adaptation rather than mitigation when it comes to climate change.

Given that the country suffered under extreme weather events over the last few years, the ministry asked for more European funds to support affected regions, such as Thessaly, as well as increase preparedness.

It should be noted that the current NECP translates to expenditures of EUR 192 billion by 2030, including large subsidies for buildings and electric cars. The Center for Renewable Energy Sources and Saving (CRES) estimated in a new study that if all NECP’s goals were hit, Greek gross domestic product would only rise by 0.6% annually until 2050.

The government considers this a very low growth percentage and will seek cost-effective solutions from now on regarding the energy transition. Minister of Environment and Energy Thodoros Skylakakis said only mature solutions would be supported and that the government is not willing to “throw money” at unproven technologies.

Skylakakis: Only mature solutions from now on

“The next phase of the transition includes enormous investments in transportation, shipping, buildings etc. If you proceed by yourself, then you are going to face increased competition from third countries. It is better to set realistic goals and hit them than have goals that will be later abandoned at a high cost in terms of investments and reliability,” said the minister.

A more realistic energy policy

When it comes to energy policy, officials said that just the renovation of 1.3 million buildings is expected to cost around EUR 25 billion by 2035. According to European directives, heating systems must also turn from fossil fuels to heat pumps by 2040, costing another EUR 25 billion.

Added on top are the subsidies for electric cars, by far the largest among EU member states. Greece provides up to EUR 8,000 for the purchase of an electric vehicle, as well as generous tax incentives.

Skylakakis considers these particular subsidies well spent since any drop in imported oil improves the economy directly. However, the government is concerned about the European long-term goal to completely phase out conventional cars, given the low income of Greek citizens compared to the European average. The current NECP calls for one of every three new cars to be electric in the country in 2030.

There is also the matter of renewable energy. According to recent statements by companies in the sector, the current capacity together with projects that have acquired connection terms translate to an annual production of 60 TWh in the near future. Even if Greece had perfect storage, demand only stands at 50 TWh and cannot match all this production.

Officially, the solution is in regional interconnections. However, the issue is complicated and depends on neighboring states’ power demand. Right now it remains unclear whether the revised NECP will retain or reduce its ambition concerning interconnections.

Industrial decline and strict finances for Greece

The switch in Greek energy and climate policy can be explained in two fundamental ways.

One is that industrial activity has dropped during the last few years as a result of the energy crisis and green requirements. Industries have complained about the difficulty of signing power purchase agreements (PPAs), as well as stiff competition from abroad. The introduction of the Carbon Border Adjustment Mechanism (CBAM) from 2025 onwards is expected to make things even worse. During the last four years a number of Greek industries have already shut down.

Secondly, there is also the issue of strict financial policy as required by the EU. The government finds itself forced to support the energy transition without having enough funds.

A recent example is the increasing deficit in the renewable energy producers’ account, as well as the Common Benefit Services (YKO) account that consumers support through their bills. The YKO deficit has ballooned to EUR 300 billion in just one year and the ministry asked for more money from the Ministry of Finance to cover it.

Last but not least, there is also the matter of public support for green policies. Skylakakis emphasized that a more realistic approach is required to maintain it.