According to EU state aid rules, the European Commission approved a German scheme that partially compensates energy-intensive businesses for higher electricity prices due to indirect emission costs under EU Emission Trading System.
Margrethe Vestager Executive Vice President, responsible for competition policy said that Germany’s scheme of EUR27.5 billion will help reduce indirect emissions costs to its energy-intensive sectors and decrease the chance of these companies moving production to other countries in the EU. The measure will allow for a cost-effective, decarbonisation of Germany’s economy, in accordance with the Green Deal goals, and limit competition.
The German measure
Germany has notified the scheme with a budget total of EUR27.5 million. It will pay part of higher electricity prices due to the effect of carbon prices on electricity production costs (so-called “indirect emission costs”) incurred between 2021-2030. This support measure is designed to reduce the risk of carbon leakage, which occurs when companies move production to countries that are not part of the EU’s ambitious climate policies. This can lead to increased greenhouse gas emissions worldwide.
Companies involved in areas at high risk of carbon loss will be able to benefit from the measure. These sectors are listed in Annex 1 of the Guidelines for certain state aid measures within the framework of the greenhouse gas emission trading scheme post-2021 (‘ETS State Aid Guidelines’). These sectors are especially vulnerable to international competition and have high electricity costs.
Eligible companies will receive partial reimbursement of indirect emissions costs incurred during the preceding year. The final payment will be made in 2031. The maximum amount of aid will generally be equal to 75 percent of indirect emission costs incurred. In some cases, however, the maximum aid amount may be higher to reduce indirect emissions costs to 1.5% of gross value added. The aid amount is determined using electricity consumption efficiency benchmarks. This ensures that beneficiaries are encouraged and supported to conserve energy.
Beneficiaries will bear a portion of indirect emissions costs. This amounts to 1 GWh per year of electricity consumption. No aid will be given. A subsidy will not be given for self-generated electricity generated by installations that were in operation prior to January 2021. The beneficiary is entitled, however, to remuneration according the German Renewable Energy Act.
Companies will need to implement certain measures in their energy management system (i.e. Companies must either (i) implement certain measures identified in their ‘energy management system’ (i.e., a plan that sets energy efficiency goals and a strategy to achieve them), or (ii). Cover at least 30% of their electricity use with renewable sources through on-site renewable energy generator facilities, power purchase agreements, or guarantees of origin. Additionally, from 2023, companies will need to make additional investments in order to invest at least 50% of the aid amount in order implement economically viable measures in their energy management system and decarbonize production.
The assessment of by the Commission
The Commission evaluated the measure in accordance with EU state aid rules and, in particular, the ETS State Aid Guidelines.
The scheme was approved by the Commission to help energy-intensive businesses to deal with higher electricity prices. It also helps to prevent companies from moving to other EU countries with less ambitious climate policies. This will reduce global greenhouse gas emissions. The scheme also conforms to the ETS State Aid Guidelines requirements for energy audits and management system. This scheme supports the EU’s climate- and environment goals and the goals in the European Green Deal. The Commission also concluded that the EU’s aid was limited to what is necessary and will not have any adverse effects on trade and competition in the EU.
The Commission approved the scheme in accordance with EU State Aid rules.
Background
The European Green Deal presented by the Commission on December 11, 2019, sets out the goal to make Europe the first continent that is climate neutral by 2050. The EU ETS is an integral part of the EU’s climate policy and a key tool to reduce greenhouse gas emissions. The European Climate Law was adopted by the European Parliament, Council, and the Council on 30 June 2021. It sets a binding goal to reduce greenhouse gas emissions by at least 55% in 2030, as compared to 1990 levels.
The Commission approvedrevised ETS state aid guidelines on 21 September 2020. This was part of modernizing all carbon leakage prevention tools, including the free allocation of CO2 emissions allowances, and is part of the EU ETS system. With the beginning of the new EU ETS trading season, the revised ETS State Aid Guidelines came into effect on January 20, 2021. These guidelines will be in effect until 2030. A mid-term update is planned for 2025 for certain elements.
The non-confidential decision of today’s decision will become available under case number SA.100559 (in Stat Aid Register), on the Competition website. The Competition Weekly eNews lists new publications of State aid decisions online and in the Official Journal.
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