Veyt updates analytical coverage on state aid for part of the costs incurred in the EU ETS by the industrials. Relevant to the GO and Power Purchase Agreement (PPA) markets through the 30 % carbon-free electricity sourcing criterion, we provide data on the number of beneficiaries/installations per country (ca. 2,500 European companies received aid in 2023) and the compensation paid since 2019, where data is available.

State aid scheme for indirect emission costs guidelines were introduced by the European Commission in 2020 for the 2021-2030 period, with the previous scheme running between 2013- 2020. Member States and EEA countries can implement national state aid schemes and introduce additional requirements, building on the Commission’s guidelines.

The scheme is intended to partially compensate energy-intensive industries that have incurred carbon costs under the EU ETS. Carbon leakage risk reduction is the main goal; to avoid a situation where European companies relocate outside the EU/EEA to other jurisdictions to bypass or greatly reduce carbon emissions costs.

State aid beneficiaries can qualify for financial compensation by either implementing the recommendations of the energy audit report, investing at least 50 % of the aid amount in greenhouse gas (GHG) emission reduction projects, or reducing the carbon footprint of their electricity consumption. For the latter, unbundled GOs and PPAs fulfil the criterion.

The following industries are eligible for aid (see table below).

Veyt’s assessment reveals that state aid schemes for energy-intensive industries can influence the demand side of the GO market. Another state aid scheme, for reduced electricity levies, with similar requirements, also supports higher demand for GOs.

Currently, 17 European countries have state aid schemes for indirect emission costs in place; separately, two schemes have already expired in Austria and Lithuania (see below). Click on the country name in the table to access the state aid decision.

Below, Veyt provides country-specific data on state aid beneficiaries/installations and compensation amount received/budget allocated, where data is available. Where data is missing, the national authorities have not made the data publicly available.

Note, beneficiaries represent companies that received state aid, whereas installations denote operational facilities under the EU ETS that belong to companies. For example, one company can have ten installations. This is differentiated in each dashboard.

Domestic currency was converted into euro for Romania, Poland and Norway, using historical exchange rates from the European Central Bank, on a daily basis, averaged to a yearly value.

Veyt provides additional notes for some countries below:

Austria: The government applied for a state aid decision only covering 2022. The scheme was not prolonged afterwards. EUR 185 million was paid out to 44 beneficiaries with 76 installations.

Belgium (Flanders, Wallonia): The exact compensation amount and beneficiaries are unknown; hence, the allocated budget and the government’s estimates are used according to official sources. In Flanders, the estimated number of beneficiaries is between 65 and 80, in Wallonia, 30.

Germany: The new coalition government plans to make the state aid for indirect emission costs a permanent scheme beyond 2030 and open it to other sectors such as data centres. German state aid has specific provisions, including geographical sourcing criteria and the use of coupled GOs. Read more here. Veyt estimates that the state aid scheme for ETS costs could have been responsible for 13.2 TWh of renewable GO demand in Central-Western Europe, and 3.3 TWh in the rest of the EU/EEA in 2023 from German benificiaries. This compares against 17.6 TWh and 3.3 TWh in 2022, respectively.

Luxembourg: The compensation amount is unknown; hence, the allocated government budget is indicated.

The Lithuanian state aid scheme expired in 2020. Only one company was compensated through the state aid mechanism between 2016-2021.

Netherlands: The Dutch government is working to extend the scheme beyond 2032.

Norway: Location-based accounting is used to qualify for the 30 % carbon-free electricity sourcing criterion. Per Veyt’s estimates, by relying on location-based reporting, as much as 11 TWh worth of RES-E demand may be falling out of the Norwegian domestic GO market in 2024. For comparison, Norway’s own-domain RES-E GO demand for the 2024 disclosure period stood at 35.4 TWh according to the AIB statistics. This effectively removes additional GO demand from the market, artificially suppressing GO price levels through regulatory means.

Note, the allocated budget and the payouts for state aid for ETS costs have been increasing and are projected to grow as free allocation allowances are phased out and EUA prices rise, lifting the state aid amounts compared to the previous years.

For GO market impact assessment, please referer to our earlier analysis.