Commission Approves €500m Luxembourg Scheme to Compensate Energy-Intensive Companies

The European Commission has approved under European Union (EU) state aid rules a Luxembourg scheme to partially compensate energy-intensive companies facing higher electricity prices resulting from indirect emissions under the EU Emissions Trading System (ETS).

The scheme will cover the period 2021-2030 and has an estimated total budget of €500 million. The measure aims to reduce the risk of "carbon leakage", when companies relocate their production to third countries with less ambitious climate policies, which leads to a reduction in economic activity in the EU without reducing global greenhouse gas emissions. The measure will benefit companies in sectors exposed to the risk of carbon leakage. These sectors face high electricity costs and are particularly exposed to international competition.

Compensation will be provided to eligible companies in the form of a partial refund of indirect emission costs incurred during the previous year. The maximum amount of aid will be equal to 75% of the indirect emission costs incurred. However, in certain cases, the maximum amount of aid may be higher in order to limit the remaining costs of indirect emissions to a ceiling of 1.5% of the company's gross value added. The Commission assessed the measure under EU state aid rules, including the EU ETS state aid guidelines.

The Commission found that the scheme was necessary and appropriate to help energy-intensive companies cope with rising electricity prices and to reduce the risk of carbon leakage. It also found that the scheme complied with the requirements for energy audits and energy management systems set out in the guidelines for state aid under the ETS. The measure therefore supports the EU's climate and environmental objectives, as well as the targets set out in the European Green Deal. Furthermore, the Commission has concluded that the aid granted is limited to the minimum necessary and will not have unintended negative effects on competition and trade in the EU. On this basis, the Commission cleared the scheme under EU state aid rules.