Revamped EU ETS state aid rules will enter into force on 1 January

They will target only at sectors at risk of carbon leakage due to high indirect emission costs

Photo: EU Margrethe Vestager.

The Commission adopted on Monday revised EU Emission Trading System State aid Guidelines in the context of the system for greenhouse gas emission allowance trading post-2021. The revamped rules will enter into force on 1 January 2021 with the start of the new ETS trading period, and replace those of 2012. 

The guidelines are in line with the Green Deal and with the EU’s ambition to be the first climate neutral economy by 2050.

The ETS Guidelines aim at reducing the risk of ‘carbon leakage’, where companies move production to countries outside the EU with less ambitious climate policies, leading to less economic activity in the EU and no reduction in greenhouse gas emissions globally.

These rules enable Member States to compensate companies in at-risk sectors for part of the higher electricity prices resulting from the carbon price signals created by the EU ETS, so-called ‘indirect emission costs’. Simultaneously, overcompensation of companies would risk running counter to the price signals created by the EU ETS to promote a cost-effective decarbonisation of the economy and create undue distortions of competition in the Single Market.

The revised ETS guidelines will target aid only at sectors at risk of carbon leakage due to high indirect emission costs and their strong exposure to international trade, set a stable compensation rate of 75% in the new period and exclude compensation for non-efficient technologies, and make compensation conditional upon additional decarbonisation efforts by the companies concerned.

To sustainably tackle climate change and achieve our Green Deal objectives, we have to put a price tag on carbon emissions while avoiding carbon leakage, EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said. Commenting that the revised guidelines are an important element of this project, she summed up that they enable Member States to support those sectors that, because of indirect emission costs, are most at risk of carbon leakage. At the same time, they help deliver on a cost-effective decarbonisation of the economy by avoiding overcompensation and undue distortions of competition in the Single Market”, she added. 

 

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