The European Commission has opened an in-depth investigation into a scheme relieving German producers of non-ferrous metals of part of their electricity costs. Germany intends to grant operating aid totalling €40 million to compensate energy intensive non-ferrous metal producers (aluminium, copper, zinc,) for a large part of the CO2 costs included in their electricity prices for the second half of 2009. As a result, these companies might gain a competitive advantage vis-à-vis their European competitors. The opening of an in-depth investigation will also allow interested third parties to comment on the measure under scrutiny. It does not prejudge the outcome of the investigation.
Commission Vice-President in charge of competition policy Joaquín Almunia said: "As a rule , the Commission does not encourage electricity price-subsidisation schemes for targeted industrial sectors as such support tends to go against the climate change and electricity market liberalisation policies and may trigger subsidy races between Member States. This is why we need to investigate this closely".
Germany intends to grant €40 million to producers of non-ferrous metals. The measure is designed to compensate for part of the CO2 costs for indirect emissions incurred by the beneficiaries in the second half of 2009. The aid will be made available to the beneficiaries in the form of a direct grant and will be calculated on the basis of the applicants annual electricity consumption (minus 1 GWh) multiplied by an amount per MWh which is defined at sub-sector level (aluminium, copper, zinc).
Germany argues in particular that the measure is necessary and proportional in order to prevent the beneficiaries from closing their operations in Germany. The German authorities submit that in case of such a closure the capacities would be taken over by production units outside the European Emission Trading System (EU ETS). Germany contends that this could de facto lead to a global increase of CO2 emissions, so-called carbon leakage risk.
However, at this stage, the Commission has doubts whether the measure is compatible with EU single market state aid rules. In particular, the Commission doubts that the beneficiaries would be exposed to a 'carbon leakage risk during the period for which the aid would be granted.
Germany did not provide sufficient information to allow the Commission to establish whether there is a risk of closure due to the CO2 costs in the electricity prices and whether in case of a closure the production capacities would indeed be taken over by production units outside the EU ETS.
Furthermore, the Commission doubts whether the aid is limited to the amount necessary to achieve the objective. Moreover, the Commission did not receive sufficient information to assess the extent of the possibly negative impacts of the measure on European competitors of the beneficiaries.
The opening of an in-depth investigation will give interested third parties, which might be affected by the measure, the possibility to comment on this issue.
The non-confidential version of the decision will be made available under the case number C33/2010 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.