The European Commission has announced amendments to the guidelines on certain state aid measures linked to the EU Emissions Trading System (ETS) for the post-2021 period. The revision responds to the sustained rise in emission allowance prices, which has significantly increased indirect carbon costs for energy-intensive industries and heightened the risk of carbon leakage.
The updated framework aims to preserve the international competitiveness of EU industry while maintaining incentives for decarbonisation investments.
Rising ETS costs drive broader carbon leakage risks
Since the ETS State Aid Guidelines were adopted in 2020, emissions costs have risen sharply and remained elevated. As a result, several internationally exposed sectors that were not previously considered at genuine risk of carbon leakage are now facing materially higher indirect electricity-related carbon costs.
Against this backdrop, the Commission has revised the compensation mechanism to ensure it remains effective and proportionate, providing sufficient protection while avoiding the dilution of decarbonization signals.
Key changes to electricity price compensation
Under the amended guidelines, the scope of eligible sectors has been expanded to include 20 additional industrial sectors and two new subsectors.
For sectors already eligible prior to the amendment, the maximum aid intensity has been increased from 75 percent to 80 percent, reflecting their increased exposure to carbon leakage risks.
The revised framework also allows member states to notify additional sectors or subsectors not listed, provided they can demonstrate genuine carbon leakage risk.
German steel industry welcomes decision
Kerstin Maria Rippel, CEO of the German Steel Federation (WV Stahl), said that electricity price compensation is indispensable for offsetting competitive disadvantages arising from carbon costs embedded in power prices. She stressed that internationally competitive electricity prices are urgently needed, particularly for medium-sized electric steel plants, which already operate with comparatively low emissions but remain heavily exposed to high power costs.
According to Rippel, stabilizing and strengthening the compensation framework is therefore a positive and necessary step. She added that it will now be essential to ensure consistent implementation at both national and EU levels, while underlining that the long-term objective must remain the establishment of permanently internationally competitive electricity prices for industry.