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EU approves 6.5bn euro German carbon leakage scheme

 960 640 Stuart O'Brien
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The European Commission has approved, under EU State aid rules, a €6.5 billion German scheme to partially compensate energy-intensive companies to address the risk of carbon leakage from higher fuel prices resulting from the German fuel emission trading system (‘German fuel ETS’).

Germany notified the Commission of its plan to support energy-intensive companies exposed to international competition by covering part of the higher fuel prices resulting from the German fuel ETS. The scheme will cover costs incurred between 2021 and 2030. The support measure is aimed at reducing the risk of ‘carbon leakage’, where companies relocate their production to countries with less stringent emission rules, resulting in increased greenhouse gas emissions globally.

The measure will benefit companies active in sectors and sub-sectors listed the EU ETS Carbon Leakage List. Those sectors face significant emission costs and are particularly exposed to international competition.

The compensation will be granted to eligible companies through a partial refund of the additional costs incurred in the previous year, with the final payment to be made in 2031. The level of compensation is between 65% and 95% of the costs, depending on the emission intensity of the beneficiaries.

In order to maintain incentives for beneficiaries to switch to less polluting fuels, the aid amount is calculated based on fuel and heat benchmarks. The beneficiaries bear a certain share of the additional costs resulting from the German fuel ETS, corresponding to 150 tCO2 per year, for which no aid will be granted.

In order to qualify for compensation, beneficiaries will have to invest at least 50% (as of 2025 at least 80%) of the aid amount in (i) measures identified in their ‘energy management system’, setting out energy efficiency objectives and a strategy to achieve them; or (ii) the decarbonisation of their production processes.

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’) which enables Member States to support the development of certain economic activities subject to certain conditions.

The Commission found that the scheme is necessary and appropriate to support energy-intensive companies to cope with higher fuel costs resulting from the German fuel ETS in order to reduce the risk of carbon leakage.

Moreover, the Commission considers that by making the aid conditional upon energy efficiency and decarbonisation efforts, the measure contributes to the objective of maximising the incentives for a cost-effective decarbonisation of the economy. It therefore supports the EU’s climate and environmental objectives and the goals set in the European Green Deal. Furthermore, the Commission concluded that the aid granted is limited to the minimum necessary and will not have undue negative effects on competition and trade in the EU.

On this basis, the Commission approved the German scheme under EU State aid rules.

Image by NakNakNak from Pixabay

EU mulls stricter battery legislation

 960 640 Stuart O'Brien
By:

The European Commission is proposing to modernise its legislation on batteries – delivering the first initiative among the actions announced in its new Circular Economy Action Plan.

The EU says batteries that are more sustainable throughout their life cycle are key for the goals of the European Green Deal and contribute to the zero pollution ambition set in it. They promote competitive sustainability and are necessary for green transport, clean energy and to achieve climate neutrality by 2050.

As such, the proposal seeks to address the social, economic and environmental issues related to all types of batteries.

It says batteries placed on the EU market should become sustainable, high-performing and safe all along their entire life cycle. This means batteries that are produced with the lowest possible environmental impact, using materials obtained in full respect of human rights as well as social and ecological standards. Batteries have to be long-lasting and safe, and at the end of their life, they should be repurposed, remanufactured or recycled, feeding valuable materials back into the economy.

The Commission proposes mandatory requirements for all batteries (i.e. industrial, automotive, electric vehicle and portable) placed on the EU market. Requirements such as use of responsibly sourced materials with restricted use of hazardous substances, minimum content of recycled materials, carbon footprint, performance and durability and labelling, as well as meeting collection and recycling targets, are essential for the development of more sustainable and competitive battery industry across Europe and around the world.

Providing legal certainty will additionally help unlock large-scale investments and boost the production capacity for innovative and sustainable batteries in Europe and beyond to respond to the fast-growing market.

The measures that the Commission proposes will facilitate achieving climate neutrality by 2050. Better and more performant batteries will make a key contribution to the electrification of road transport, which will significantly reduce its emissions, increase the uptake of electric vehicles and facilitate a higher share of renewable sources in the EU energy mix.

With the proposal, the Commission also aims to boost the circular economy of the battery value chains and promote more efficient use of resources with the aim of minimising the environmental impact of batteries. From 1 July 2024, only rechargeable industrial and electric vehicles batteries for which a carbon footprint declaration has been established, can be placed on the market.

To close the loop and maintain valuable materials used in batteries for as long as possible in the European economy, the Commission proposes to establish new requirements and targets on the content of recycled materials and collection, treatment and recycling of batteries at the end-of-life part. This would make sure that industrial, automotive or electric vehicle batteries are not lost to the economy after their useful service life.

To significantly improve the collection and recycling of portable batteries, the current figure of 45% collection rate should rise to 65 % in 2025 and 70% in 2030 so that the materials of batteries we use at home are not lost for the economy. Other batteries – industrial, automotive or electric vehicle ones – have to be collected in full. All collected batteries have to be recycled and high levels of recovery have to be achieved, in particular of valuable materials such as cobalt, lithium, nickel and lead.

The proposed regulation defines a framework that will facilitate the repurposing of batteries from electric vehicles so that they can have a second life, for example as stationary energy storage systems, or integration into electricity grids as energy resources.

The use of new IT technologies, notably the Battery Passport and interlinked data space will be key for safe data sharing, increasing transparency of the battery market and the traceability of large batteries throughout their life cycle. It will enable manufacturers to develop innovative products and services as part of the twin green and digital transition.

With its new battery sustainability standards, the Commission will also promote globally the green transition and establish a blueprint for further initiatives under its sustainable product policy.