Energy and Environmental State Aid: New guidelines offer only limited protection from increases in electricity prices

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euroferWe appreciate the aim of the guidelines that the energy intensive industry, such as steel industry should be protected from artificial increase in electricity prices due to support offered to preferred energy generation technologies”, Gordon Moffat comments on the adoption of the new guidelines for energy and environmental state aid today by the European Commission and adds, “however the 15 per cent minimum contribution to national renewables subsidies will still lead to a further substantial increase in energy costs for many energy intensive companies in the EU, costs which competitors do not have to bear”.

 “The problem is”, says Moffat,“not the exemptions for industry but the subsidies themselves.Industrial electricity prices are already today higher than in most other countries on the globe and twice as high as in the US. We cannot operate an industry that is producing globally traded products such as steel where you have differentials in cost that are so horrendous”, stresses Gordon Moffat, Director General EUROFER the starting position for the need for new energy and environmental state aid guidelines.

Green policies have had the greatest impact on energy prices, especially subsidies for renewables, which have completely de-stabilised the energy markets in Europe, Moffat says. Since 2008, a large part of the public expenditure assessed has served to promote renewable energy, such as wind and solar energy. Increasingly, Member States have granted State aid also to measures such as energy infrastructure projects or security of supply measures.

Therefore thenew State Aid guideline is the most urgent issue for energy intensive sectors. The 2030 framework should be based on the principle of energy supply at affordable and competitive prices.

The new Guidelines define criteria for assessing public support to energy or environmental projects and aim at helping Member States to design measures that contribute to reaching their 2020 climate targets, while ensuring they are cost-effective and do not cause undue distortions of competition.

FAQ: EU state aid rules

Impact of EEAG on affordable energy prices and industrial competitiveness

 

 

Do the new guidelines fully exempt the steel industry from funding support to finance renewable energy sources?

No, they do not.The guidelines do not allow to exempt all steel making processes and those which may be exempted have to pay a minimum share of the subsidies, which is at least 15% or 4% of their GVA, or 0.5% of their GVA if energy intensity is at least 20%. In addition, it is down to the member states to decide on the final level of reduction from the surcharge.

 

Is steel industry now protected from artificial increase in electricity prices, will there be a level playing field in future with competitors worldwide?

No, there won’t be any level playing field with competitors because the guidelines do not allow to exempt all steel making processes and those which may be exempted have to pay a minimum share of the subsidies. In addition, it is for the member state to decide whether any exemptions are made at all. Most competitors outside the EU do not have to bear any such costs. In addition, there is no level playing field possible within the EU either because the restrictions do not give member states the flexibility they need. 15% minimum contribution may be much more in one members state then in another. The Commission therefore puts distortions in the Single market into stone.

 Why are new guidelines EEAG the most urgent issue for energy intensive sectors, such as steel?

Because we are talking about billions of potential additional costs for the sector -costs which competitors do not have to bear. The EU has already today industrial energy costs which are at the top-end worldwide. Any further increase will be contrary to the objective of the heads of state and governments to establish competitive industrial energy prices.

 

The European Commission wants to “avoid Carbon leakage”, a spokesperson  describes the aim of the new guidelines. Is this threat banned for the European steel industry?

As long as the EU creates costs for industry which our competitors do not have, the risk of carbon leakage will remain. The initial draft EEAG have been improved over the last weeks but still form a huge risk for our competitiveness. In particular, this has to been seen in connection with other regulatory burdens, such as the costs which the EU’s emissions trading system is starting to create.

 

What exactly are the advantages for the steel industry out of these new guidelines? What are the disadvantages?

The disadvantages overweigh clearly, because the cost burden resulting from subsidies for renewables and other decarbonistation measures create competition distortions in the Single market and the global market. In the field of environmental subsidies, the one or other steel project may however benefit to some extent.

 

Representing by EUROFER, the European steel industry represents the world leader in its sector, producing on average 170 million of tonnes of steel per year with direct employment of 350.000 highly skilled people. More than 500 steel production and processing sites in 24 member states provide direct and indirect employment for millions of European citizens. 

www.eurofer.org