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Commission approves 104 mln euros Croatian scheme to support energy-intensive companies

The European Commission has approved, under EU State aid rules, a 104 million-euro Croatian scheme to reduce an electricity consumption levy imposed on energy-intensive companies, the EU’s executive body announced on 31 January.

The Croatian state-aid scheme aims at mitigating the risk that, due to this levy, energy-intensive companies may relocate their activities to locations outside the EU with less ambitious climate policies. In addition, the scheme contributes to the bloc’s climate and environmental objectives set out in the European Green Deal, the Commission said.

“This 104 million-euro scheme enables Croatia to reduce the risk that energy-intensive companies move their activities to locations outside the EU with less ambitious climate policies. At the same time, it maintains the incentives for an electrification and decarbonisation of the Croatian industry, in line with the European Green Deal objectives,” said Margrethe Vestager, Executive Vice-President in charge of competition policy.

The scheme, which will run until 31 December 2028, will be open to companies active in sectors listed under Annex I in the Guidelines on State aid for climate, environmental protection and energy 2022 (CEEAG). Beneficiaries will need to consume at least 500 MWh per year. Under the scheme, the reduction in the RES levy will not exceed 75 per cent and it will depend on the electro-intensity of the beneficiary (for example, the greater the electro-intensity, the higher the reduction). The applicable reduction may not result in a levy below 0.5 euro/megawatt-hours (MWh).

In addition, beneficiaries will have to conduct an energy audit and either (i) perform certain energy efficiency investments, (ii) invest in projects leading to substantial reductions of their greenhouse gas emissions, or (iii) cover at least 60 per cent of their electricity consumption with renewable energy sources.

Croatia has also established a transitional plan to progressively phase out the RES levy reduction for energy-intensive companies that paid reduced RES levies in 2020 or 2021 but are no longer eligible under the new scheme. 

The Commission assessed the measure under EU State aid rules, in particular, Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities subject to certain conditions and the CEEAG.

As stated in a press release from the EU’s executive body: “the Commission found that the scheme facilitates the development of certain economic activities that rely heavily on electricity in their production processes and are particularly exposed to international competition.”

In addition, the Commission stated that the measure is “necessary and appropriate to contribute to the achievement of the European Green Deal objectives”. In particular, it reduces the risk of (i) adverse environmental impacts due to relocation of the targeted economic activities to jurisdictions with less ambitious climate policies and (ii) discouraging the electrification of production processes within the sectors concerned, the press release added.

The measure also requires the beneficiaries to undertake investments in energy efficiency, projects aiming to reduce greenhouse gas emissions or to consume a sufficient share of electricity from renewable sources. Moreover, the measure is proportionate, as aid will not exceed 75 per cent of the RES levy and is limited to the energy-intensive sectors listed in Annex I of the CEEAG. Therefore, the Commission concluded, as stated in the press release, that the scheme brings about positive effects that outweigh any possible negative effects in terms of distortions to competition and trade in the EU.

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