Wednesday, October 5, 2022

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European Commission: Czech companies to receive partial compensation for indirect emission costs

The European Commission approved a Czech scheme under EU State aid rules, to partially compensate energy-intensive companies for higher electricity prices resulting from indirect emission costs under the EU Emission Trading System (ETS).

The scheme was notified by Czechia, with a total estimated budget of 1.4 billion euros. It will cover part of the higher electricity prices incurred between 2021 and 2030. The support measure is aimed at reducing the risk of carbon leakage, where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting in less economic activity in the EU and no reduction in greenhouse gas emissions globally.

“This 1.4 billion euro measure will allow Czechia to reduce the risk of carbon leakage for its energy-intensive industries. At the same time, the incentives for cost-effective decarbonisation of its economy will be maintained, in line with the Green Deal objectives and undue competition distortions will be limited,” said the European Commission’s Executive Vice-President, Margrethe Vestager.

The compensation will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2031. The maximum aid amount will be equal to 75 per cent of the indirect emission costs.

In order to qualify for compensation, companies will have to either implement certain energy audit recommendations or cover at least 30 per cent of their electricity consumption with carbon-free sources through on-site renewable energy generation facilities, carbon-free power purchase agreements or guarantees of origin.

According to the press statement of the Commission, the aid is limited to the necessary minimum and will not have undue negative effects on competition and trade in the EU.

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