OECD Inventory of Support Measures for Fossil Fuels: Country Notes

Greece

Energy resources and market structure

In line with a government strategy seeking to diversify energy sources and reduce the CO2 intensity of the economy, the most important change in the Greek energy landscape of the last decade has been an increasing reliance on imported natural gas along with a decrease in lignite use that in 2021, virtually all the country’s natural gas supply were imported overseas.

Since the country has very little indigenous oil production, the remaining oil demand in Greece is traditionally covered by imported crude oil, which in the year 2022 mostly came from Iraq (44%), Kazakhstan (17%), Libya (16%) and Saudi Arabia (10%). Greece's oil consumption was estimated at 294 000 barrels per day in December 2022. Only two companies operate in the refining market, Hellenic Petroleum S.A. and Motor Oil Hellas S.A., which cover 90% of demand, while the rest is imported by wholesale companies.

 

Source: IEA (2022), "World energy statistics", IEA World Energy Statistics and Balances (database).

Greece has set a target to achieve approximately 61% share of renewable energy in its total gross final energy consumption between 2020 and 2030. As a result, the share of energy, in particular electricity, from renewable sources has increased significantly over the last decade. Natural gas is the main source of electricity generation in Greece. In 2022, over 55% of total electricity generation was derived from the fossil fuel. By comparison, wind ranked second with 20.7%. That year, over 40% of Greece's electricity production was renewables-based, mainly from solar, hydroelectric, and wind sources.

The Third Memorandum of Understanding for economic adjustment programme conducted via the European Stability Mechanism (ESM) obliges the Greek Government to reduce the Public Power Corporation’s (PPC) market share of the wholesale market (production/import) and in supply relevant markets down to no more than 50% by 2020. In September 2019, the Greek administration repealed the law on the NOME (Nouvelle Organisation du Marché de l'Electricité) mechanism (Government Gazette 145/Α/30.9.2019), which came into force in 2016. According to this decision, the Regulatory Authority for Energy (RAE) determined the annual amount of electricity that would be available through auction sales of forward electricity products.

In June 2018, the Hellenic Energy Exchange S.A (HEnEx S.A.) was founded and is owned by the state-owned electricity market operator LAGIE, the Athens Exchange Group, the Independent Power Transmission Operator (ADMIE), the EBRD, and the Hellenic Gas Transmission System Operator (DESFA). The HEnEx S.A. manages the Energy Markets of physical delivery and the Energy Financial Markets in accordance with the provisions of Law 4512/2018 and its delegated act. The HEnEx S.A. will provide access to new liquid energy markets and products that will, among others, support greater domestic competition, reduce barriers to entry for new energy market participants and allow the effective participation of renewable energy producers in the electricity markets. It will also support regional integration by facilitating market coupling with neighbouring countries such as Italy and Bulgaria. The new regulatory framework will replace the existing model of operation of the wholesale market (mandatory pool system) to implement the European regulations and directives on the completion of the single European electricity market, the so-called Target Model. The start of the operation of the target model in Greece took place in November 2020, while the market coupling through the interconnection with Italy was launched in December 2020.

The competitive conditions in the natural gas market have been modified since 2017. Several changes in the natural gas market environment have led to a decrease in the market share of the Public Gas Corporation of Greece (DEPA) (now with less than 60% of the relevant market). Since this period, the natural gas market has seen an increase in the number of importing gas companies. The entry of new supplies was then followed by a steady increase in market share outside DEPA. Long-term gas supply contracts were also increasingly concluded with suppliers other than DEPA, with reductions also seen in the electronic tenders for the supply of natural gas furnished by DEPA.

Energy prices and taxes

Prices for petroleum products in Greece are set by the market. Indicative prices are announced weekly by the government as a guide for final consumers. The sale of fuels is subjected to the standard VAT, with rates having increased from 19% in 2009 to 23% in 2011 to their present level of 24% (for most fossil fuels) since May 2016. Excise tax and other fees and charges are also levied on fuels with reduced duty rates for diesel used for winter heating.

Lignite resources allocated to PPC are subject to the special lignite fee which started charging in 2012 at a rate of EUR 2/MWh of net electricity generated by lignite power electricity stations. In addition, the PPC is also charged a special local communities’ tax payable to communities where mining takes place, at a rate of 0.5% of PPC’s turnover.

Public service obligation charges are also chargeable to electricity consumers, as Greek electricity suppliers have the obligation to supply off-grid islands at the same rates as those on the mainland despite higher costs.

Figure 2. Total tax rebates and support for fossil fuels in Greece

 

 

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Recent developments and trends in support

Following the 2015 Memorandum of Understanding between the European Commission (which acted on behalf of the European Stability Mechanism), the Government of Greece, and the Bank of Greece, the country has adopted measures supporting fossil-fuel consumption in certain sectors, such as the preferential tax treatment of diesel fuel used by farmers. In the same vein, low-income households are also granted tax relief for their consumption of heating oil to offset income losses.

The advent of COVID-19 in early 2020 reversed the economic climate, while measures to limit its spread led to abrupt cessation of economic activities in many sectors. During the early stages of the pandemic, the importance of the energy sector and a secure energy supply for the smooth operation of essential economic sectors became apparent, which mitigated the economic impact of the restrictions imposed. The energy sector (production and network infrastructure) supported the operation of the health system, teleworking, and trade in companies and firms that remained in operation during the lockdown. The cessation of activity in many sectors and restrictions on non-essential travel resulted in dramatic decrease in energy demand, mainly from the transport, services, and trade sectors, with the gradual lifting of restrictions measures having a mitigating effect.

In October 2020, a EUR 450 million support programme was announced by the Greek administration to aid companies in the energy, transport and other sectors (e.g. tourism, construction) particularly affected by the confinement measures of the pandemic. The support took the form of subsidised loans for companies with up to 3 000 employees in their workforce and was administered by the state, the Greek Infrastructure Fund together with the European Regional Development Fund and European Investment Bank.

From mid-March 2022, the Greek government started setting a ceiling on the gross profit margin of products and services considered essential to the public’s health, food, transport, and security.1 The scope of this regulatory intervention is two-fold. First, the measure attempts to mitigate the spike in energy prices (especially natural gas) in light of the economy’s re-opening after the relaxation of pandemic restrictions. Secondly, the measure aims to stabilise increasing energy prices in the country in the wake of the Russian Federation’s war of aggression against Ukraine. The regulation puts a particular emphasis on oil products (i.e. diesel, gasoline and heating oil) where no specific ceiling is set (rate or price) and that there is no reference to specific products or services (as opposed to during the pandemic when healthcare products and food were covered). The cap is defined as the profit margin per unit from the sale of products or services that applied before 31 August 2021 for diesel and gasoline, and 31 March 2021 for heating oil.

To mitigate the skyrocketing prices following the Russian invasion of Ukraine, the Greek government, from July 2022 extended the fuel subsidy to motorists (“Fuel Pass 2”) for another three months (i.e. July-September 2022). The new, extended “Fuel Pass” increased the amount disbursed for car owners to EUR 80 in the mainland and EUR 100 in the islands, where fuel prices tend to be higher. The means tested subsidy programme is expected to benefit around 3.1 million motorists. The total cost of the subsidy for “Fuel Pass 2” is estimated at EUR 375 million, while Fuel Pass 1 and 2 are estimated at EUR 580 million.

In June 2022, the government launched the “Power Pass” platform. Power Pass is a platform for the financial support of household consumers' electricity bills and was published in the Official Gazette Issue B 2827/06.06.2022. The subsidy concerns the electricity bills of a first home or student accommodation in Greece, issued during the period from 01-12-2021 to 30-06-2022 and, depending on the amount of the bills, it can reach up to the amount of EUR 600.

In April 2023, the Greek government announced an electricity subsidy on household tariffs in an effort to shield domestic consumers from the effects of the global energy crisis. Without income criteria, the electricity subsidy would equal EUR 15/MWh for monthly consumptions up to 500 kWh (90% of households in Greece). This reaches EUR 54 /MWh for households included in the Social Household Tariff. For those with a monthly consumption of over 500 kWh, the subsidy is attached to a condition to reduce the average daily energy consumption by 15% compared to 2022. The value of the electricity subsidy for households and farmers in April 2023 reached EUR 24.4 million.

The fiscal cost of support measures for fossil fuels in Greece was estimated at EUR 6.24 billion in 2022 (Table 1). Eighty-seven per cent (87%) was directed at end user beneficiaries, as opposed to 12% directed to firms. Support was mainly given out in the form of direct transfers (EUR 5.43 billion) accounting for 87% of the total fiscal cost of support measures. Tax expenditures amounted to EUR 0.81 billion.

The fiscal cost of support measures for fossil fuels has increased by 201% since 2017. Since last year, tax expenditures have decreased by 8%, from EUR 0.88 billion to EUR 0.81 billion and direct transfers increased by 515%, from EUR 1.31 billion to EUR 5.43 billion. All growth rate percentages above are expressed in terms of nominal national currency amounts.

Table 1. Fiscal cost of support measures for fossil fuels (in billions of national currency)

	2017	2018	2019	2020	2021	2022
Tax expenditures	1.027	1.080	0.914	0.899	0.883	0.808
Direct transfers	1.047	0.902	1.022	0.800	1.310	5.431
Total	2.074	1.982	1.935	1.699	2.194	6.239

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports). Support measures for which such information is not available are excluded from the aggregate amount reported in this table. In addition, support measures in certain countries may not have been exhaustively identified.

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Table 2 highlights a selection of support measures associated with a large fiscal cost. A description of these measures is provided in Table 3.

Table 2. Selected support measures for fossil fuels with a large fiscal cost (in billions of national currency)

Measures associated with large fiscal cost in 2022		2022	2017	Variation since 2017
Tax expenditures
	Post-retirement benefits for PPC Group pensioners	0.244	0.269	-0.026
	Post-retirement benefits for PPC parent company employees	0.150	0.170	-0.019
	Excise Tax on the use of diesel for heating purposes	0.134	0.146	-0.012
Direct transfers
	Electricity subsidy to consumers	3.262	(Started in 2021)	3.262
	Subsidy for Petroleum-based Small- and Off-Grid Power Generators on Remote Islands	0.387	0.533	-0.146
	Natural Gas subsidy to consumers	0.339	(Started in 2022)	0.339

1. Fiscal cost of support measures for fossil fuels are based on information reported by countries through official documentation (e.g. budget reports).

2. Tax expenditures are estimates of revenue that is foregone due to a particular feature of the tax system that reduces or postpones tax payments (relative to a jurisdiction’s benchmark tax system) to the benefit of fossil fuels’ producers or users. Hence, (i) tax expenditures estimates can increase either because of greater concessions (relative to the benchmark tax system) or because of an increase in the benchmark itself; (ii) cross-country comparisons of tax expenditures can be misleading due to country-specific benchmark tax systems.

3. Support measures for fossil fuels are included in the Inventory without reference to their economic or environmental effects. No judgment is therefore made as to whether such measures are inefficient or ought to be reformed.

4. Data are expressed in nominal local currency. Data for 2022 are on a preliminary basis.

Source: OECD Inventory of support measures for fossil fuels (2023).

Table 3. Description of selected support measures for fossil fuels

Post-retirement benefits for PPC Group pensioners	Such reduced tariffs to pensioners are considered retirement obligations and are calculated at the discounted value of the future retirement benefits deemed to have accrued at year-end based on the employees earning retirement benefit rights steadily throughout their working period.
Post-retirement benefits for PPC parent company employees	Such reduced tariffs to pensioners are considered retirement obligations and are calculated at the discounted value of the future retirement benefits deemed to have accrued at year-end based on the employees earning retirement benefit rights steadily throughout their working period.
Excise Tax on the use of diesel for heating purposes	This measure provides excise-tax exemptions on the use of diesel for heating purposes. According to law 2960/2001, there is a reduced excise tax rate of EUR 280 per 1 000 litres on the use of diesel for heating purposes during the heating period of 15/10 ― 30/4 each year.
Electricity subsidy to consumers	Electricity subsidy to consumers
Subsidy for Petroleum-based Small- and Off-grid Power Generators on Remote Islands	Under this measure, a subsidy is paid to oil companies that supply petroleum products to remote areas (islands, border areas, etc.) of Greece. This inventory allocates the annual amounts reported in Greece’s budgetary data to diesel oil and motor gasoline on the basis of the IEA’s Energy Balances for Greece’s road-transport sector and includes motor gasoline but excludes biofuels and gas/diesel oil but not biofuels.
Natural Gas subsidy to consumers	In an effort to shield domestic consumers from the effects of the global energy crisis, the Greek government announced a natural gas subsidy on household tariffs. From January to October 2022, the subsidy was adjusted each month and ranged from EUR 0/MWh to EUR 40/MWh for households and EUR 20-40/MWh for non-household consumers.

Data sources

Country data in OECD.stat

OECD Fossil Fuel Support Portal

National data sources

Note on the Methodology

Aggregate numbers from the Inventory represent the fiscal cost of support measures for fossil fuels. They should not be interpreted as a level of support for fossil fuels, nor as an indicator of the extent to which the considered policies are favourable or unfavourable to climate mitigation.

The Inventory reports tax expenditures as estimates of revenue foregone due to measures that reduce or postpone tax payments relative to a jurisdiction’s benchmark tax systems to the benefit of fossil fuels producers or users. Tax expenditure estimates can thus increase over time due to either an increase in the offered concession (relative to benchmark tax systems) or an increase in the benchmark itself. Cross-country comparisons of tax expenditures can also be misleading due to differences in countries’ benchmark tax systems.

Note

← 1.  See Government Gazette, FEK 1329/B/22.03.2022.