As the price of carbon in the European Union’s Emissions Trading System (ETS) hit a new record high on Friday 19 August due to a return to coal to make up for the lack of gas, the European Commission has authorised three national support schemes to provide partial compensation to energy-intensive companies facing higher electricity prices as a result of indirect emissions costs under the ETS.
The measure notified by Germany has a total estimated budget of €27.5 billion. The maximum amount of aid will be 75% of these costs. However, in some cases, the maximum amount of aid may be higher in order to limit the remaining costs of indirect emissions to a maximum of 1.5% of the company’s gross value added.
Beneficiaries bear a certain share of their indirect emissions costs, corresponding to 1 GWh of electricity consumption per year, for which no aid will be granted. In addition, no aid will be granted for the consumption of self-generated electricity in plants commissioned before 1 January 2021, for which the beneficiary is entitled to a remuneration under the German Renewables Energy Act.
To be eligible for compensation, companies will either have to implement certain measures defined in their ‘energy management system’ or cover at least 30% of their electricity consumption from renewable sources.
The aid from the Netherlands amounts to €834.6 million and will cover part of the higher electricity prices resulting from the impact of carbon prices on electricity production costs incurred between 2021 and 2025.
The maximum amount of aid will be 75% of these costs. Beneficiaries will have to bear a certain share of their indirect emissions costs (1 GWh), for which no aid will be granted.
Beneficiaries will have to reduce their greenhouse gas emissions by 3% per year compared to the 2020 level and demonstrate that they either cover at least 30% of their electricity consumption from carbon-free sources or invest at least 50% of the aid in projects leading to substantial emission reductions from their installations.
On the other hand, no aid will be granted for the production of energy carriers based on more than 50% of fossil raw materials.
For Finland, the validated aid is €687 million. The maximum amount of aid per beneficiary will be 25% of the costs incurred. The total amount of aid granted may not exceed €150 million per year.
Beneficiaries will either have to demonstrate that the greenhouse gas emissions of their installations are below the applicable benchmark used for the allocation of allowances for free under the ETS, or cover at least 30% of their electricity consumption from carbon-free sources.
For Thierry Bros, professor at Sciences Po Paris and energy expert, the Commission’s decision is not justified.
“European industries were already getting 89% of their permits for free. Now in those three countries, industries will get more free permits than effective emissions”, he deplored, while questioning the compatibility of this State aid with the ‘EU Carbon Border Adjustment Mechanism’ (CBAM). (Original version in French by Lionel Changeur with Damien Genicot)