Economic Affairs Ministry welcomes European Commission’s decision on State aid to prevent carbon leakage

Today, the European Commission gave the go-ahead for a German provision on financial compensation to energy-intensive companies for part of the additional carbon costs in the context of the national fuel emission allowance trading. The support measure aims to reduce the risk of carbon leakage, i.e. the relocation of production to countries with less stringent emission rules, which results in an increase in greenhouse gas emissions worldwide. Companies which are active in sectors and sub-sectors that are also part of the carbon leakage list in the context of the EU Emissions Trading System (ETS) will benefit from the measure. These sectors are facing enormous emissions trading costs and particularly strong international competition.

Federal Minister for Economic Affairs and Climate Action Robert Habeck said: "We welcome today’s decision on the State aid. This is an important signal from Brussels for companies which are facing fierce international competition and at the same time investing in the mitigation of climate change.

The planned State aid totalling €6.5 billion for the period up to 2030 in the context of the national fuel emission allowance trading to prevent carbon leakage was applied for in 2021. The carbon leakage compensation is expected to be adjusted accordingly when the national fuel emission allowance trading is integrated in the new EU fuel emissions trading system from 2027 and new EU State aid rules apply.

Pursuant to the national provision, it will be possible to make compensation payments to eligible companies which take the form of partial reimbursements of the additional costs incurred in the previous year. The State aid is calculated on the basis of the fuel or heating benchmarks which are also used in the context of the EU ETS. The compensation payments range between 65% and 95%, depending on the different emission intensities of the privileged sectors. In order to obtain the carbon leakage State aid, eligible companies must provide ecological services in return. These services include investments to improve energy efficiency and further investment projects to decarbonise facilities. The companies concerned need to provide proof of investments amounting to at least 80% of the respective State aid payments from 2025.