EC approves €27.5bn German scheme to compensate energy-intensive companies

The European Commission (EC) has approved under state aid rules a German scheme to compensate energy-intensive companies for increases in electricity costs attributable to indirect emissions costs under the EU’s Emission Trading System. The German scheme – valued at €27.5bn – is aimed at reducing carbon leakage: the risk that companies might respond to rising costs by relocating their production facilities outside the EU in jurisdictions where climate regulations are less stringent. In terms of scale, the compensation will cover a maximum of 75% of indirect emissions costs or higher if the remaining emissions costs exceed 1.5% of the company’s gross value added. The EC said the scheme was “necessary and appropriate”.