The European Commission has expanded the list of industries that can count on state support under the EU ETS greenhouse gas emissions trading system.
According to the institution, this is an attempt to reduce the risks of carbon leakage abroad.
Anticipating risks to the economy and the environment
The ETS state aid guidelines function as a mechanism to compensate businesses for the economic costs of complying with the EU's environmental goals.
The authorities are concerned that high financial pressure due to the need to pay for emissions could push energy-intensive businesses to relocate outside the EU. This will not contribute to reducing greenhouse gas emissions, as companies will not have the ETS as a safeguard. At the same time, local economies will suffer from job losses and tax revenue losses.
The principles of state compensation were adopted back in 2020. Since then, emissions costs have risen, increasing the risk of CO2 leakage. This is precisely why the rules have been significantly revised and additional assistance provided to businesses.
Essence of the amendment
The following changes have been enshrined in the EU ETS State Aid Guidelines:
- Expansion of the list of industry sectors eligible for compensation. Enterprises in an additional 20 sectors and two subsectors may now qualify for payments. These include the production of organic chemicals, as well as certain activities in the glassmaking, ceramics, and battery manufacturing industries.
- For those economic sectors that were already eligible for compensation prior to these amendments, the compensation rate has increased from 75% to 80%.
- The list of eligible sectors may be further expanded upon the request of EU Member States. To do so, justification of carbon leakage risks in a specific sector not yet listed must be provided.
- Large beneficiaries are required to contribute to the green transition, specifically through investments in energy efficiency.
Geographical and carbon update
The amendment also applies to CO2 emission factors and geographical zoning. These are updated in line with the latest data.
Carbon coefficients take into account the CO2 content of fossil fuels used for power generation in a given region. Thanks to the changes, countries will be able to gradually transition to lower coefficients between 2026 and 2030.
Earlier, EcoPolitic reported that the European Commission had proposed a number of changes to strengthen the CBA mechanism. In particular, this involves the creation of a temporary Decarbonization Fund to compensate for EU ETS costs for the most vulnerable businesses.
