European Commission: State Aid Rules for ETS Post 2012 Electricity Costs and for CCS Ready Power Plants

The European Commission has adopted a framework under which Member states may compensate certain electro-intensive users for part of the higher electricity costs expected to result from a tightening of the EU Emissions Trading Scheme (ETS) as from 2013.

The rules shall ensure that national support measures are designed in a way that preserves the EU objective of decarbonising the European economy and maintains a level playing field among competitors in the internal market, yet prevents carbon leakage, the Commission points out. The sectors deemed eligible for compensation include producers of aluminium, copper, fertilisers, steel, paper, cotton, chemicals and some plastics. If the conditions set out in the new rules are met, aid to compensate for EU ETS allowance costs passed on to electricity prices in these sectors will be considered compatible with the internal market.

The rules allow subsidies of up to 85% of the increase faced by the most efficient companies in each sector from 2013 to 2015. The cap will gradually fall to 75% in 2019-2020.

In addition, the construction of new highly efficient power plants which will implement an environmentally safe capture and geological storage of CO2 (CCS-ready) by 2020 may receive support of up to 15% of the investment costs.

The latter is a problem for Germany that still has not passed a controversial CCS bill and thus not transposed Directive 2009/31/EC on the geological storage of carbon dioxide. For this reason the Vattenfall AG had announced the cancellation both of its EUR 1.5 billion CCS demonstration project in Jänschwalde and the exploration of possible storage facilities in Eastern Brandenburg last December.

In light of the discussion on how to secure sufficient energy to supplement and back-up the increasing amount of intermittent renewable energy sources in Germany, it will be interesting to see if the new Commission rules will spark renewed efforts to pass the CCS legislation so that new power plant with CCS technology could be subsidised.

Source: European Commission

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