The European Commission has approved a €6.5 billion (£5.6bn) German scheme to address carbon leakage risks for energy-intensive companies as a result of the national emissions trading system (ETS).

The measure will partially compensate energy-intensive firms exposed to international competition by covering part of the higher fuel prices resulting from the German fuel ETS incurred between 2021 and 2030.

The level of compensation is between 65% and 95% of the costs, depending on the emission intensity of the beneficiaries.

It is aimed at reducing the risk of carbon leakage, where companies relocate their production to countries with less stringent emission rules, resulting in increased greenhouse gas emissions globally.

To qualify for the compensation, companies will have to invest at least 50% (and as of 2025, at least 80%) of the aid amount in measures identified in their energy management system, setting our energy efficiency objectives and a strategy to achieve them or the decarbonisation of their production processes.

Margrethe Vestager, Executive Vice-President in charge of competition policy said: “This €6.5 billion scheme paves the way for Germany to reduce the risk of carbon leakage for its energy-intensive industries in the context of its national fuel emission trading system.

“At the same time, the scheme maintains incentives for a cost-effective decarbonisation of the German economy, in line with the Green Deal objectives. And this while keeping distortions of competition to the minimum.”

Article source: https://www.energylivenews.com/2023/08/11/eu-approves-e6-5bn-german-scheme-to-address-carbon-leakage-risks/