Ref. Ares(2020)3607940 - 08/07/2020
Ref. Ares(2020)4264192 - 14/08/2020
AM 1: compensation for the use of industrial gases in eligible sectors
Current text
Proposed amendment
Paragraphs 12 and 13
Paragraphs 12 and 13
(12) ‘actual electricity consumption’, in MWh,
(12) ‘actual electricity consumption’, in MWh,
means the actual electricity consumption at the
means the actual electricity consumption at the
installation (including electricity consumption
installation (including electricity consumption
for the production of out-sourced products
for the production of out-sourced products
eligible for aid) in year t, determined ex post in
eligible for aid and electricity consumption for
year t+1;
producing industrial gases consumed for the
production of products eligible for aid) in year
(13) ‘electricity consumption efficiency
t, determined ex post in year t+1;
benchmark’, in MWh/tonne of output and
defined at Prodcom 8 level9, means the
(13) ‘electricity consumption efficiency
product-specific electricity consumption per
benchmark’, in MWh/tonne of output and
tonne of output achieved by the most
defined at Prodcom 8 level9, means the
electricity-efficient methods of production for
product-specific electricity consumption per
the product considered. The electricity
tonne of output achieved by the most
consumption efficiency benchmark update shall
electricity-efficient methods of production for
be consistent with Article 10a(2) of the EU ETS
the product considered. It includes electricity
Directive. For products within the eligible
consumption for producing industrial gases
sectors for which fuel and electricity
consumed for the production of products
exchangeability has been established in section
eligible for aid. The electricity consumption
2 of Annex I to Commission Delegated
efficiency benchmark update shall be consistent
Regulation (EU) 2019/33110, the definition of
with Article 10a(2) of the EU ETS Directive. For
electricity consumption efficiency benchmarks is products within the eligible sectors for which
made within the same system boundaries,
fuel and electricity exchangeability has been
taking into account only the share of electricity
established in section 2 of Annex I to
for the determination of the aid amount. The
Commission Delegated Regulation (EU)
corresponding electricity consumption
2019/33110, the definition of electricity
benchmarks for products covered by eligible
consumption efficiency benchmarks is made
sectors are listed in Annex II to these Guidelines; within the same system boundaries, taking into
account only the share of electricity for the
determination of the aid amount. The
corresponding electricity consumption
benchmarks for products covered by eligible
sectors are listed in Annex II to these Guidelines;
Justification
Several eligible industrial sectors such as steel, non-ferrous and refineries use for unavoidable
purposes significant amounts of industrial gases such as oxygen which have an important
electricity consumption embedded. Such industrial gases are also linked to the energy balance, as
they often contribute to reducing the consumption of other fuels and/or electricity. The lack of
compensation for the indirect costs linked to industrial gases further exposes the eligible sectors
to carbon leakage risk. Therefore, similarly to the allocation of free allowances to the heat
consumer under the rules on free allocation for the direct emissions, the consumption of
industrial gases should also be considered as eligible for financial compensation when it occurs in
a sector that is exposed to indirect carbon leakage and state aid should be granted to the exposed
sector.
AM 2: clarifying that possibility for compensating beyond 75% is open to all eligible sectors
Current text
Proposed amendment
Paragraphs 30 and 31
Paragraphs 30 and 31
30. Given that for some sectors the aid intensity 30. Given that for some undertakings or sites
of 75 % might not be sufficient to ensure that
the aid intensity of 75 % might not be sufficient
there is adequate protection against the risk of
to ensure that there is adequate protection
carbon leakage, when needed, Member States
against the risk of carbon leakage, when
may limit the amount of the indirect costs to be
needed, Member States may limit the amount
paid at undertaking level to […] % of the gross
of the indirect costs to be paid at undertaking
value added of the undertaking concerned in
or, where appropriate, site level to 0.5 % of the
year t. The gross value added of the
gross value added of the undertaking or site
undertaking must be calculated as turnover,
concerned in year t. The gross value added of
plus capitalised production, plus other
the undertaking or site must be calculated as
operating income, plus or minus changes in
turnover, plus capitalised production, plus other
stocks, minus purchases of goods and services
operating income, plus or minus changes in
(which shall not include personnel costs), minus
stocks, minus purchases of goods and services
other taxes on products that are linked to
(which shall not include personnel costs), minus
turnover but not deductible, minus duties and
other taxes on products that are linked to
taxes linked to production. Alternatively, it can
turnover but not deductible, minus duties and
be calculated from gross operating surplus by
taxes linked to production. Alternatively, it can
adding personnel costs. Income and
be calculated from gross operating surplus by
expenditure classified as financial or
adding personnel costs. Income and
extraordinary in company accounts is excluded
expenditure classified as financial or
from value added. Value added at factor costs is extraordinary in company accounts is excluded
calculated at gross level, as value adjustments
from value added. Value added at factor costs is
(such as depreciation) are not subtracted.
calculated at gross level, as value adjustments
(such as depreciation) are not subtracted.
31. When Member States decide to limit the
amount of the indirect costs to be paid at
31. When Member States decide to limit the
undertaking level to […] % of gross value added, amount of the indirect costs to be paid at
that limitation must apply to all eligible
undertaking or site level to 0.5 % of gross value
undertakings in the relevant sector. If Member
added, that limitation must apply to all eligible
States decide to apply the limitation of […] % of
undertakings or sites in the relevant sector. If
gross value added only to some of the sectors
Member States decide to apply the limitation
listed in Annex I, the choice of sectors must be
of […] % of gross value added only to some of
made on the basis of objective, non-
the sectors listed in Annex I, the choice of
discriminatory and transparent criteria.
sectors must be made on the basis of
objective, non-discriminatory and transparent
criteria.
Justification
The additional compensation should be set so that indirect costs are capped at 0.5% of the GVA.
This possibility should be open to all eligible sectors and not restricted only to some of them. The
GVA of companies is highly dependent on their structure, including the configuration of the
production steps where the higher share of value added is generated. Hence, a site assessment
would also be necessary where appropriate.
AM 3: deletion of conditionality criteria (since the incentive effect is secured by the benchmarks)
Current text
Proposed amendment
Paragraph 54
Paragraph 54
54. Member States also commit to monitoring
Deleted
that beneficiaries covered by the obligation to
conduct an energy audit under Article 8(4) of
the Energy Efficiency Directive will:
(a) implement recommendations of the audit
report, to the extent that the pay-back time
for the relevant investments does not exceed
[5] years and that the costs of their
investments is proportionate; or alternatively
(b) reduce the carbon footprint of their
electricity consumption, for example, through
installing an on-site renewable energy
generation facility (covering at least 50% of
their electricity needs), through a carbon-free
power purchase agreement; or alternatively
(c) invest a significant share of at least 80% of
the aid amount in projects that lead to
substantial reductions of the installation’s
greenhouse gas emissions and well below the
applicable benchmark used for free allocation
in the EU Emissions Trading System.
Justification
Compensation of indirect costs does not distort incentives for energy efficiency investments
because it is still based on very strict benchmarks reflecting the best performance in the sector
(and actually the state aid intensity does not even cover the full benchmark but only 75%of it).
Furthermore, the “incentive effect” is also preserved by the fact that the benchmarks will be
updated during the phase 4, so that companies have further interest in improving performance,
where technically possible. Furthermore, the proposed conditionality requirements are actually
linked to the implementation and enforcement of other pieces of legislation (notably the Energy
Efficiency Directive and the Renewable Energy Directive). However, member states retain the
possibility of adopting different instruments to promote energy efficiency and renewables in
order to achieve the targets set in such legislation. Therefore, the conditionality requirements
would overlap and possibly collide with different national measures.
AM 4 (option 1): maintaining sectors belonging to the steel value chain (mining of iron ores and
seamless pipes) in the list of eligible sectors
Current text
Proposed amendment
Annex I
Annex I
NACE 24.10: Manufacture of basic iron and
NACE 24.10: Manufacture of basic iron and
steel and ferro-alloys
steel and ferro-alloys, including seamless steel
pipes
NACE 07.10 Mining of iron ores
Justification
The NACE code 0710 (Mining of iron ores), which is eligible for financial compensation in the EU
ETS phase 3, is very important for the steel sector as it is within the same value chain. Even
though it has a different NACE code than steel making (NACE 2410), actually it covers the activity
of sintering of iron ores that is performed in the integrated steel sites. Since it contributes to the
overall exposure to the indirect carbon leakage risk of the steel industry, it is important that it
remains eligible for the post 2020 period.
Furthermore, in the EU ETS phase 3 seamless steel pipes were also included in the list of eligible
sectors as they are closely linked to the steel sector because they represent a very electro-
intensive process similar to other hot/cold rolling processes. Therefore, they should remain
eligible.
AM 4 (option 2): maintaining sectors belonging to the steel value chain (mining of iron ores and
seamless pipes) in the list of eligible sectors
Current text
Proposed amendment
Annex I
Annex I
NACE 24.10: Manufacture of basic iron and
NACE 24.10: Manufacture of basic iron and
steel and ferro-alloys
steel and ferro-alloys, including seamless steel
pipes and agglomeration of iron ores
NACE 07.10 Mining of iron ores
Justification
The NACE code 0710 (Mining of iron ores), which is eligible for financial compensation in the EU
ETS phase 3, is very important for the steel sector as it is within the same value chain. Even
though it has a different NACE code than steel making (NACE 2410), actually it covers the activity
of sintering of iron ores that is performed in the integrated steel sites. Since it contributes to the
overall exposure to the indirect carbon leakage risk of the steel industry, it is important that it
remains eligible for the post 2020 period.
Furthermore, in the EU ETS phase 3 seamless steel pipes were also included in the list of eligible
sectors as they are closely linked to the steel sector because they represent a very electro-
intensive process similar to other hot/cold rolling processes. Therefore, they should remain
eligible.
AM 5: maintaining the existing areas for Central Western Europe and Nordic region
Current text
Proposed amendment
Paragraph 14(10)
Paragraph 14(10)
‘CO2 emission factor’, in tCO2/MWh, means the ‘CO2 emission factor’, in tCO2/MWh, means the
weighted average of the CO2 intensity of
weighted average of the CO2 intensity of
electricity produced from fossil fuels in different electricity produced from fossil fuels in different
geographic areas. The weight shall reflect the
geographic areas. The weight shall reflect the
production mix of the fossil fuels in the given
production mix of the fossil fuels in the given
geographic area. The CO2 factor is the result of
geographic area. The CO2 factor is the result of
the division of the CO2 equivalent emission data the division of the CO2 equivalent emission data
of the energy industry divided by the gross
of the energy industry divided by the gross
electricity generation based on fossil fuels in
electricity generation based on fossil fuels in
TWh. For the purposes of these Guidelines, the
TWh. For the purposes of these Guidelines, the
areas are defined as geographic zones (a) which areas are defined as geographic zones (a) which
consist of submarkets coupled through power
consist of submarkets coupled through power
exchanges, or (b) within which no declared
exchanges, or (b) within which no declared
congestion exists and, in both cases, hourly day-
congestion exists and, in both cases, where the
ahead power exchange prices within the zones
hourly day-ahead power exchange prices within
showing price divergence in euros (using daily
the zones showing price divergence in euros
ECB exchange rates) of maximum 1 % in
(using daily ECB exchange rates) of maximum 1
significant number of all hours in a year. Such
% in significant number of all hours in a year, or
regional differentiation reflects the significance
c) regions CWE and Nordic, in both cases,
of fossil fuel plants for the final price set on the
also if larger price differences are
wholesale market and their role as marginal
experienced but where short term limitations
plants in the merit order. The mere fact that
on interconnectors resulting in larger price
electricity is traded between two Member
differences or dominance of one market upon
States does not automatically mean that they
the other exist as indicated by calculations
constitute a supranational region. Given the
of the covariances between areas or Member
States. Such regional differentiation reflects the
lack of relevant data at sub-national level, the
significance of fossil fuel plants and for CWE
geographic areas comprise the entire territory
and Nordic areas also reflects the impact from
of one or more Member States. On this basis,
abroad, for the final price set on the wholesale
the following geographic areas can be
market and their role as marginal plants in the
identified: Nordic (Sweden and Finland), Baltic
merit order. The mere fact that electricity is
(Lithuania, Latvia and Estonia), Iberia (Portugal
traded between two Member States does not
and Spain), Czechia and Slovakia (Czechia and
automatically mean that they constitute a
Slovakia) and all other Member States
supranational region. Given the lack of relevant
separately. The corresponding maximum
data at sub-national level, the geographic areas
regional CO2 factors are listed in Annex III. In
comprise the entire territory of one or more
order to ensure equal treatment of sources of
Member States. On this basis, the following
electricity and avoid possible abuses, the same
geographic areas can be identified: Nordic
CO2 emission factor applies to all sources of
(Norway, Denmark, Sweden and Finland),
electricity supply (auto generation, electricity
Central-West Europe (Austria, Belgium,
supply contracts or grid supply) and to all aid
Luxembourg, France, Germany and
beneficiaries in the Member State concerned.
Netherlands), Baltic (Lithuania, Latvia and
Estonia), Iberia (Portugal and Spain), Czechia
and Slovakia (Czechia and Slovakia) and all
other Member States separately. The
corresponding maximum regional CO2 factors are listed in Annex III or factors decided
by using additional analysis based on
electricity markets models on request from
Member States and approved by the
Commission. In order to ensure equal treatment
of sources of electricity and avoid possible
abuses, the same CO2 emission factor applies to
all sources of electricity supply (auto
generation, electricity supply contracts or grid
supply) and to all aid beneficiaries in the
Member State concerned;
Justification
The methodology for defining the marginal emission factor gives inaccurate results not reflecting
reality if areas are defined unnecessarily too small, especially where the factor is impacted by
neighboring areas. In addition, such a fragmentation would give a wrong signal and counteract the
need and goal to comprehensively realize the EU’s internal market also for energy. Therefore,
electricity market models could be used as additional analysis in cases where the actual pass-
through factor comes from price influence from connected markets and not from domestic
emission-intensive power generation. This should result in, either, to maintain the geographical
regions CEW and Nordic or allow to apply individual emission intensities, if one market is
dominated by another.