25 August 2022

The European Commission has approved a Dutch scheme to partially compensate energy-intensive companies for higher electricity prices resulting from indirect emission costs under the EU Emission Trading System (ETS). 

The impact of carbon prices on electricity generation costs 

The Dutch scheme, with a total estimated maximum budget of €834.6 million, will cover part of the higher electricity prices arising from the impact of carbon prices on electricity generation costs from 2021 to 2025. The support measure is aimed at reducing the risk of ‘carbon leakage’, where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting in increased greenhouse gas emissions globally. 

  • The measure will benefit companies active in sectors at risk of carbon leakage 
  • No aid will be granted to produce energy carriers with more than 50 % of feedstock from fossil origin 

The Commission has approved the scheme with the idea to support energy-intensive companies to cope with the higher electricity prices and to avoid them relocating to countries outside the EU with less ambitious climate policies. Added, the scheme:  

  • Complies with the requirements on energy audits and management systems set out in the ETS State aid Guidelines  
  • Supports the EU’s climate and environmental objectives and the goals set in the European Green Deal 
  • Will not negatively impact competition and trade in the EU 

Allocation of the compensation 

The compensation will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2026.  

The maximum aid amount will be equal to 75 % of the indirect emission costs incurred.  

  • The beneficiaries will have to bear a certain share of their indirect emission costs, corresponding to 1 GWh of electricity consumption per year, for which no aid will be granted. 

In order to qualify for compensation, beneficiaries must reduce their greenhouse gas emissions by 3 % per year compared to 2020 level. In addition, beneficiaries must demonstrate that they either:  

  • Cover at least 30% of their electricity consumption with carbon-free sources (through on-site or near-site renewable energy generation facilities or carbon-free power purchase agreements);  
  • Or invest at least 50% of the aid amount in projects that lead to substantial reductions of their installation’s greenhouse gas emissions well below the applicable benchmark for free allocation in the EU ETS. 

NextGenerationEU helps the European Union to overcome the damage caused by the coronavirus pandemic, both economically and socially. It is a tool to address the ecological crisis and enables the EU to become greener, more digital, resilient and better prepared for future challenges.    

Yvette Poumpalova

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