EC Approves Aid for Energy-Intensive Companies in Germany
Strategic Research Institute
Published on :
23 Aug, 2022, 6:44 am
The EU Commission has approved aid of around EUR 27.5 billion for energy-intensive German companies companies for higher electricity prices resulting from indirect emission costs under the EU Emission Trading System, with which part of the CO2 price on electricity for the years 2021 to 2030 is to be reimbursed by the state. To do this, the companies concerned must implement measures for greater energy efficiency or cover at least 30% of their electricity consumption from renewable energy sources. In addition, companies must make additional investments from 2023 so that at least 50% of the total amount of aid is used to implement measures for the efficient use of energy or to decarbonize their production process.
The scheme notified by Germany, with a total estimated budget of EUR 27.5 billion, will cover part of the higher electricity prices arising from the impact of carbon prices on electricity generation costs, indirect emission costs, incurred between 2021 and 2030. The support measure is aimed at reducing the risk of carbon leakage, where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting increased greenhouse gas emissions globally.
The measure will benefit companies active in sectors at risk of carbon leakage to the Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post-2021. Those sectors face significant electricity costs and are particularly exposed to international competition.
The compensation will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2031. The maximum aid amount will be generally equal to 75 % of the indirect emission costs incurred. However, in some instances, the maximum aid amount can be higher to limit the remaining indirect emission costs incurred to 1.5 % of the company's gross value added. The aid amount is calculated based on electricity consumption efficiency benchmarks, which ensure that the beneficiaries are encouraged to save energy.
The beneficiaries bear a certain share of their indirect emission costs, corresponding to 1 GWh of electricity consumption per year, for which no aid will be granted. Moreover, no aid will be granted for the consumption of self-generated electricity from installations put into operation before 1 January 2021, for which the beneficiary is entitled to remuneration under the German Renewable Energy Act.
The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The EU ETS is a cornerstone of the EU's policy to combat climate change and a key tool for curbing greenhouse gas emissions cost-effectively. On 30 June 2021, the European Parliament and the Council adopted the European Climate Law endorsing the binding target to cut emissions by at least 55% by 2030, compared to 1990 levels.
On 21 September 2020, the Commission adopted revised ETS State Aid Guidelines in the context of the system for greenhouse gas emission allowance trading post-2021, as part of the modernisation of all carbon leakage prevention tools related to the EU ETS, such as free allocation of CO2 emission allowances. The revised ETS State Aid Guidelines entered into force on 1 January 2021 with the start of the new EU ETS trading period. They will apply until 2030, with a mid-term update of certain elements foreseen for 2025.