The European Commission announced that it has approved new schemes by Austria and Spain aimed at compensating energy-intensive companies for higher electricity prices due to the impact of carbon prices under the EU Emission Trading Scheme (ETS).

According to the Commission, the schemes are aimed at reducing the risk of companies relocating their activities to countries outside the EU with less ambitious climate policies, which would result in an increase in global greenhouse gas emissions.

The Emissions Trading System (ETS) is the EU’s internal cap and trade carbon pricing mechanism. Established in 2005, the ETS puts a price on carbon emissions for key GHG intensive sectors, including electricity and heat generation, oil refineries, steel, cement, paper, chemicals, and commercial aviation, among others.

As Europe has faced rising energy prices, first driven by the Russia-Ukraine war, and now exacerbated by the war in Iran, several member states have recently called on the Commission to review the ETS to help reduce pressure on industry. In March, EU Commission President Ursula von der Leyen pledged to introduce near-term measures to revise the ETS, with a comprehensive review of the ETS planned for July 2026.

Under the new Austrian scheme, aid will take the form of a refund of up to 75% of the ETS-based emissions costs incurred in the previous year, with the final payment to be made in 2030, with the amount calculated based on electricity consumption efficiency benchmarks, which ensure that the beneficiaries are encouraged to save energy.

The Austrian scheme will be open to companies in sectors that are both particularly energy-intensive and exposed to international trade, such as iron and steel, aluminum and other metals, paper, and chemicals, with companies required to prove that they invest at least 80% of the aid received into energy efficiency measures or other decarbonization measures. The Commission said that it approved the scheme with a budget of up to €900 million.

Spain’s plan amends a prior approved scheme in which compensation is granted to eligible companies through a partial refund of the ETS carbon pricing costs, with the amendment extending the eligibility of companies active in new sectors deemed at risk of relocating, and increasing maximum aid intensity from 75 to 80% of the indirect emissions costs.

The Commission said:

“The Commission found that the schemes are necessary and appropriate to support energy-intensive companies to cope with the higher electricity prices and avoid relocation, are limited to the minimum necessary and will have limited impact on competition and trade in the EU.”