The European Commission is consulting until 10 March on introducing stricter conditions for compensating businesses for indirect costs of the EU ETS. This would involve reducing the number of sectors eligible for compensation and lowering the compensation rate from 85% to 75%. These changes are designed to comply with revised ETS state aid guidelines under the proposed ‘European green deal’.
The EU ETS generates two types of costs for companies:
direct costs, as companies have to buy the amount of allowances that corresponds to their actual emission level; and
indirect costs, as companies pay more for the electricity that they consume since electricity producers pass on the carbon price to consumers via electricity prices.
EU law provides for compensation for both types of costs in accordance with the ETS state aid guidelines. The proposed revisions would:
shorten the number of sectors eligible for compensation from fourteen to eight, to focus on those most at risks of carbon leakage;
lower the compensation rate from 85% at the beginning of the previous ETS trading period (2013 to 2020) to 75% in the new period, and exclude compensation for non-efficient technologies; and
make compensation conditional upon decarbonisation efforts by the companies concerned.
The European Commission is consulting until 10 March on introducing stricter conditions for compensating businesses for indirect costs of the EU ETS. This would involve reducing the number of sectors eligible for compensation and lowering the compensation rate from 85% to 75%. These changes are designed to comply with revised ETS state aid guidelines under the proposed ‘European green deal’.
The EU ETS generates two types of costs for companies:
direct costs, as companies have to buy the amount of allowances that corresponds to their actual emission level; and
indirect costs, as companies pay more for the electricity that they consume since electricity producers pass on the carbon price to consumers via electricity prices.
EU law provides for compensation for both types of costs in accordance with the ETS state aid guidelines. The proposed revisions would:
shorten the number of sectors eligible for compensation from fourteen to eight, to focus on those most at risks of carbon leakage;
lower the compensation rate from 85% at the beginning of the previous ETS trading period (2013 to 2020) to 75% in the new period, and exclude compensation for non-efficient technologies; and
make compensation conditional upon decarbonisation efforts by the companies concerned.
