EU adopts new rules to reduce CO2 emissions
The European Commission has unveiled new guidelines enabling state aid to prevent polluting industries from moving to non-EU countries where the climate standards are lower. The new guidelines were adopted on 21 September 2020 after the European Commission put forward a plan to further cut emissions by at least 55 per cent by 2030.
- The adoption was in line with the European Green Deal, which was presented by the Commission in December 2019 as a roadmap for making the EU's economy sustainable and achieving climate neutrality by 2050.
- The EU's revised Emission Trading System (ETS) State aid Guidelines, which will enter into force on January 1, 2021, will replace the previous guidelines adopted in 2012.
- The new guidelines are aiming at reducing carbon leakage, which happens when companies move their operations to countries outside the EU, which have less ambitious climate policies.
- This leads to less economic activity in the EU and no reduction in greenhouse gas emissions globally.
- Under the new guidelines, the aid will be targeted at sectors at risk of carbon leakage due to high indirect emission costs and their strong exposure to international trade.
- Based on an objective methodology, 10 sectors and 20 sub-sectors are eligible for the aid.
- The compensation will cover 75 percent of costs, rather the previous 85 per cent and will not cover non-efficient technologies, to maintain the companies' incentives for energy efficiency.