The European Commission has proposed to revise the EU Emission Trading System (ETS) state aid guidelines for the post-2021 period; the current guidelines, aimed at reducing the risk of carbon leakage (companies transferring production to non-EU countries with lower climate ambitions and constraints), will expire at the end of the third ETS period, on 31 December 2020.
The draft revised guidelines would cut the number of activity sectors eligible for compensation from 14 to 8, to focus on those identified as the sectors most exposed to an actual risk of carbon leakage, namely the production of refined petroleum products, of iron, steel and ferro-alloys, of paper and pulp, of metals (lead, zinc, tin), of aluminium, of other inorganic basic chemicals and of leather clothes. Consequently, some energy-intensive sectors might no longer be eligible, such as copper production, chemical and fertiliser minerals production, organic basic chemicals or iron ore mining. These sectors would no longer receive free emission allowances reducing their direct costs.
In addition, the compensation rate would be lowered from the current 85% to 75% and compensation for non-efficient technologies would be excluded. Finally, financial compensation would be made conditional upon decarbonisation efforts by the concerned companies.
The draft guidelines are open for consultation until 10 March 2020.
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