Revision of the list of sectors eligible for aid for indirect emission costs under the EU Emissions Trading System in Guideline (2020/C 317/04)

Subject: Revision of the list of sectors eligible for aid for indirect emission costs under the EU Emissions Trading System in Guideline (2020/C 317/04)

As part of the revision of the EU Emissions Trading System (ETS) Directive, adopted in 2023, the European Parliament and the Council of the European Union decided that the compensation scheme for increases in electricity prices resulting from the inclusion of the costs of greenhouse gas emissions, commonly referred to as ‘indirect emission costs’, should remain in place. In Guideline (2020/C 317/04), the Commission has already established which sectors are eligible for aid for indirect emission costs for the current fourth trading period. In the first half of 2022, the Commission considered increasing the number of sectors eligible for aid, but this was not implemented.

1. How does the Commission justify the decision it made in 2022 to ultimately not extend the list of sectors eligible for aid for indirect emission costs?

2. In light of the increased energy and electricity prices for the relevant sectors and the increased risk of carbon leakage, as well as the recent reform of the EU ETS, will the Commission increase the number of sectors eligible for aid in the near future?

Submitted:22.1.2024

Answer given by Executive Vice-President Vestager on behalf of the European Commission (7 March 2024)

1. As per point 68 of the Emission Trading System (ETS) State aid Guidelines (1), the Commission may decide to review or adapt those Guidelines at any time if this should be necessary for reasons associated with competition policy or in order to take account of other Union policies, international commitments or material market developments. In 2022, the situation on energy markets was critical due to the Russian military aggression against Ukraine. As a targeted response, the Commission adopted the Temporary Crisis Framework on 23 March 2022 and later, on 9 March 2023, amended it as the Temporary Crisis and Transition Framework (TCTF) (2) offering Member States a number of tools to provide relief to seriously affected companies, with a wide eligibility of energy-intensive sectors for the highest aid intensities. With the EU’s economic situation showing resilience and after consulting Member States, the remaining crisis sections of the TCTF are set to expire in June 2024.

2. The ETS State aid Guidelines address carbon leakage risks arising from the cost of emission allowances passed on in electricity prices. The significant increases in wholesale electricity prices in 2021 and 2022 were particularly driven by rising wholesale gas prices, a trend which reversed in the course of 2023. The ETS State aid Guidelines do not foresee a revision of the list of sectors eligible for indirect cost compensation as part of the review planned for 2025.

1 ∙ ⸱ Communication from the Commission Guidelines on certain state aid measures in the context of the system for greenhouse gas emission allowance trading

post-2021, 2020/C 317/04, OJ C 317, 25.9.2020, p. 5. Communication from the Commission Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia 2023/C 101/03, C/2023/1711, OJ C 101, 17.3.2023, p. 3. 2 ∙ ⸱ Communication from the Commission Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia 2022/C 131 I/01, OJ C 131I, 24.3.2022, p. 1.