EU expands compensation for industry for emissions regulation costs

The European Commission will allow more energy-intensive industries to receive compensation to cover the costs of complying with EU emissions rules. This is stated in a press release from the institution.

On December 23, the EC adopted an amendment to the guidelines on certain state aid measures in the context of the greenhouse gas emissions trading system after 2021.

The changes relax the rules that allow member states to compensate industry for part of the higher electricity bills resulting from additional production costs due to the impact of carbon prices.

“The sustained increase in emission costs since the adoption of the ETS State Aid Guidelines in 2020 has significantly increased the risk of carbon leakage for sectors exposed to international competition but not considered to be at real risk at that time,” the statement said.

The new recommendations include, among other things:

• expanding the list of industrial sectors eligible for compensation – adding 20 new ones, as well as two new subsections;
• an increase in aid intensity from 75% to 80% for sectors that were already eligible before these changes, to take into account the increased risk of carbon leakage.

The German Steel Association (WV Stahl) has welcomed the EC’s decision as a positive milestone. It believes that compensation for electricity prices is necessary to offset the competitive disadvantages caused by additional CO2 emission costs.

«The current uncompetitive electricity prices pose an existential threat, especially to medium-sized electric steel mills that already produce low-CO2 products and at the same time hinder the transformation of the steel industry towards climate neutrality,» said Kerstin Maria Rippel, CEO of WV Stahl.

The association also noted that the German government had kept its word and taken a clear position on this issue. It is now important to ensure this result during further implementation at the national and European levels next year.

As a reminder, the EU is strengthening CBAM by adding a wide range of goods – 180 new products.