Klima-, Energi- og Forsyningsudvalget 2019-20
KEF Alm.del Bilag 246
Offentligt
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Danish response to the
Commission’s
public consultation on the draft ETS State
Aid Guidelines
In general, the Danish government can support many of the steps taken in relation to
modernize the State Aid Guidelines for indirect cost compensation for energy-intensive
industries under the EU ETS (ETS Guidelines).
It is important that the revision of the ETS State Aid Guidelines support a cost-effective
transition towards climate neutrality in the EU. The objective of the Commission to
decarbonise the EU energy systems within the framework of The European Green
Deal as a mean to combat climate change and to promote a more sustainable econo-
my and society as a whole could therefore be supported.
Aside from this, the Danish government has some comments to the proposal. The
comments that are described more in details below focus on the following topics:
The “future” of the state aid guidelines
The list of sectors included in annex II
Access to renewable energy supply contracts
Fulfilling the 25 percent target.
The future of the state aid guidelines
While acknowledging the importance and necessity of addressing carbon leakage
risks
–
and ensuring a level playing field with third countries with less climate ambition
than the EU
–
it is still important to emphasise, that the guidelines cannot, and has
never been intended to, be used as an opportunity to delay the efforts, Member States
should put in place in relation to a transition to energy supplies based on renewable
energy. The state aid rules was for that reason in ETS phase III also designed as a
transitional measure only.
Denmark and a considerable number of other EU Member States have joined the
Powering Past Coal Alliance, a coalition of ambitious states, corporations and organi-
sations who deem it possible and urgent to ban fossil fuels from electricity production
within a limited number of years. These ambitions to phase out coal in the electricity
production points to the fact that it will be a likely possibility in the European Union to
provide electricity supplies based on renewable energy to industries within a period
that reaches not very far beyond ETS phase IV.
On those grounds, the Danish government would again urge the Commission to de-
sign the guidelines in a way, which prepares the phasing out of ETS state aid as a
temporary measure by the end of ETS phase IV in 2030 or soonest possible thereafter
–
and ensure that aid schemes are devised, conducted and completed on a strict and
temporary basis. This can e.g. be achieved by increasing the pace, at which the max-
imum aid intensity factor is reduced from 75 percent in 2020 to a zero or near-zero
percentage by 2030.
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A targeted approach for Annex II of the revised guidelines
Denmark has earlier encouraged the Commission to adopt a targeted approach when
deciding which sectors/industries should be included in Annex II on sectors deemed to
be exposed to a genuine risk of carbon leakage due to indirect emission costs. The
Danish government acknowledges that a transparent and targeted approach has been
chosen in this matter and fully support the proposal in this respect.
Thus, special attention should be paid to sectors where large and small businesses
compete with each other within the internal market. The granting of state aid in these
sectors will often provide a disproportional advantage to large industry players over
their minor competitors, which may cause risks for business, growth and consumer
prices alike.
A restrictive approach will also be appropriate towards sectors that may benefit from
horizontal state aid rules, such as the General Block Exemption Regulation (GBER).
Such regulations allow for more flexible national state aid schemes and should be
given preference in order to limit the number of national aid schemes that companies
need to know, understand, apply for and administer.
The Danish Government is aware of the fact that other stakeholders had argued for
more sectors to be included in the Annex. However, we would still recommend the
Commission to continue to insist that inclusion of more sectors than the present re-
quires thorough documentation.
Access to renewable energy supply contracts
The existing guidelines state that no state aid must be granted in case of electricity
supply contracts that do not include any CO2 costs. Energy supply choices for carbon
leakage exposed sectors has therefore been deliberately limited to fossil fuelled ener-
gy production.
The Danish Government finds it therefore very positive that the proposal now incorpo-
rates equal treatment of all sources of electricity by removing existing restrictions on
supply contracts for energy from renewable energy sources. This is crucial to ensure
that the guidelines are no longer biased towards industry consumption of fossil-fuelled
energy, effectively preventing both industry and suppliers the opportunity to promote
green energy transition on economic viable terms.
To ensure that this important change will have effect in practice, the Danish govern-
ment urges the Commission to reject any future proposition of ETS state aid schemes
that fail to apply equal conditions for all energy supply contracts, including renewables.
The Commission must make sure that Member States will be
attentive to this change
of rules when seeking approval for aid schemes for the upcoming ETS phase IV. It
cannot be up to Member States to decide whether the provisions on equal treatment
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should be applied to their full extend, nor would it be seem possible to conceive cir-
cumstances where exemptions from the rule could be considered justified.
Fulfilling the 25 percent target in article 10a (6) of the ETS directive
For Denmark, it is a matter of considerable concern that the proposal do not give bet-
ter attention to the explicit objective of article 10a (6) which states, that
“Member
States shall also seek to use no more than 25 percent of the revenues generated from
the auctioning of allowances for the financial measures”.
It should be noted with severe apprehension that this objective has been subject to
growing disregard in recent years. According
to the Commission’s own data,
the vol-
ume of state aid measures within Member States has reached surprising and unfore-
seen levels of up to 60 percent of revenues generated from the auctioning of allow-
ances. Clearly, state aid schemes of such proportions must be considered far beyond
the intended scope of article 10a (6).
Recognizing the non-binding character of the target value agreed upon, the Danish
government suggests that the Commission reviews the proposal to include measures
that will address this issue effectively.
Without prejudice to other approaches that the Commission may want to explore,
Member States should be obliged to apply a lower degree of aid intensity than the
allowed 75 percent, in cases where this is necessary to bring the volume of aid grants
in line with the 25 percent-objective. To avoid unreasonable effects of outlier years,
this measure could be applied automatically after averaging e.g. the recent three cal-
endar years of an aid scheme’s duration.
In this way, Member States would have a better incentive to make discerning judge-
ments when putting forward envisaged state aid schemes and when assessing a
scheme’s economic scope and effect. In addition, Member States would be motivated
to be more judicious with their decision on when and where to apply aid measures,
bringing the schemes in line with the need of a targeted and measured approach to
state aid.
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