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German EU ETS compensations could total €350m in 2013

19 Jul 2013 19:31:15 | edcm

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Germany can spend up to €350m in 2013 to compensate its energy-intensive industry for electricity bill costs associated with the EU Emissions Trading System (ETS), the country's federal ministry of economics and technology has told ICIS.

The European Commission this week gave the green light for the move. Germany requested permission to compensate industry on the basis of EU framework guidelines passed in 2012 allowing EU countries to compensate some of the sectors considered at risk of carbon leakage, including producers of aluminium, copper, fertilizers, steel, paper, cotton, chemicals and some plastics (see EDCM 17 July 2013).

"As of 2014, German companies will be able to retroactively apply for compensation for the pervious year for costs passed on to the electricity price as a result of the EU ETS," Philip Rosler, Germany's minister of economics and technology and the country's vice chancellor, said in a statement on Friday.

Rosler has opposed the back-loading proposal of the Commission on the basis that this would increase costs for German companies at a time of recession, which has been key in delaying the country taking an official position on the matter.

A final version of the compensation plan is yet to be published, but will shortly appear in the government gazette, he added.

A ministry spokesman told ICIS it has allocated €350m of the federal budget for compensation in 2013.

"The exact costs cannot be determined yet as they depend on various factors such as electricity consumption, production output, etc, of the companies," he said.

The ministry spokesman added that giving "a general answer" about CO2 knock-on costs for electricity prices is impossible, as the figure varies by company and electricity mix.

Only two schemes

The German budget figure tops what the UK has earmarked over a longer period.

The UK government has allocated £213m (€247m) until a spending review in April 2015 to help energy-intensive sectors offset increases in electricity prices from the domestic carbon floor price (CFP) and the region's EU ETS (see EDCM 20 May 2013).

While the Commission already approved the UK ETS compensation scheme in May, the country still awaits approval for the CFP part. "The European Commission is still considering our state aid case and we won't be able to publish guidance or accept applications for this until the Commission have agreed that the scheme is allowable state aid," a spokesman for the UK Department of Energy and Climate Change said on Friday.

No other EU country has submitted a compensation plan for approval, a Commission source said.

A study by Paris-based Institute for Sustainable Development and International Relations (IDDRI) and CDC Climat Research has warned that as these compensation measures are optional and rely on a "decentralised mechanism" of direct budgetary compensation, they risk distorting the internal EU energy market.

"Some governments may be unwilling or unable to directly compensate electro-intensive industries... particularly in the present context of intensive fiscal consolidation in the EU," the researchers said. Silvia Molteni

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