In line with the ‘European Green Deal’ and the EU's aim to become the first climate-neutral economy by 2050, on Monday 21 September the European Commission adopted new guidelines 2021-2030 on certain state aid measures in the context of the greenhouse gas emission trading system (ETS). They will enter into force on 1 January 2021 with the start of the new trading period of the EU ETS and will replace the previous guidelines adopted in 2012.
The guidelines specify that, in order to limit the risk of distortion of competition within the internal market, aid must be limited to sectors which are exposed to a real risk of carbon leakage because of the significant indirect costs they actually bear as a result of passing on the costs of greenhouse gas emissions in electricity prices.
A real risk of carbon leakage exists only where the beneficiary is active in one of the sectors listed in Annex I. This annex (composed of 10 sectors and 20 sub-sectors, compared to 14 sectors and seven sub-sectors in the current guidelines) has been somewhat modified.
These included paper pulp manufacturing, refined petroleum products and other non-ferrous metallurgy. Six sectors come off the list (soil nutrient, fertilisers, minerals, non-welded steel tubes and pipes, etc.)
The guidelines aim to reduce the risk of carbon leakage when companies relocate production to countries outside the EU with less ambitious climate policies. In particular, they allow Member States to compensate companies in sectors at risk for part of the increase in electricity prices resulting from the carbon price signals created by the EU ETS (‘indirect emission costs’).
The guidelines set a stable compensation rate (aid intensity) of 75% in the new period (compared to 85% at the beginning of the ETS trading period ending at the end of 2020) and exclude compensation for inefficient technologies.
Cross-compliance is introduced. Offsetting will be conditional on the decarbonisation efforts made by companies, for example: - carrying out energy audits; - implementing the recommendations of energy audits; - facilitating an increase in sustainable and private investment ; - reducing the carbon footprint of their electricity consumption.
Some aspects of the guidelines will be reviewed at the mid-term of the trading period, such as CO2 factors and efficiency benchmarks. The Commission will ensure that the Guidelines remain consistent with future legislative changes affecting the functioning of the EU ETS.
Member States that choose to grant State Aid through the compensation of indirect costs of the ETS will have to notify it to the Commission on the basis of these guidelines.
Link to documents: https://bit.ly/3iPU4qp (Original version in French by Lionel Changeur)