EU Allows Broader State Aids to Protect Industries from Energy Volatility

The European Commission said Thursday it is relaxing limits on state support measures to cushion "the most exposed" businesses from energy price spikes brought about by the war in the Middle East.

The Middle East Crisis Temporary State Aid Framework (METSAF), adopted following a consultation with member states, allows various forms of government assistance for agriculture, fishery and transport companies until yearend.

"For agriculture, fishery, land transport (road, rail and inland waterways) and intra-EU short sea shipping, Member States will be able to compensate up to 70 percent of a beneficiary's extra costs due to the price increase of fuel and fertilizer caused by the crisis", the Commission said in an online statement.

"The price increase will be determined by each Member State by looking at the difference between the relevant market price and an applicable historical benchmark price. The total extra costs will then be calculated based on the beneficiary's current or latest pre-crisis consumption.

"For these sectors, a simplified option will make it easier for beneficiaries to qualify for the aid. It allows Member States to calibrate individual aid amounts on elements like the size and type of beneficiaries' activities, a general estimate of fuel consumption in the sector, or other relevant proxies, rather than beneficiaries having to provide detailed proof of their actual consumption. Under this option, each beneficiary can receive up to EUR 50,000 [$58,400].

"For energy-intensive industries eligible under temporary electricity price relief schemes in line with section 4.5 of the CISAF [Clean Industrial Deal State Aid Framework], it will be possible to increase the aid intensity from 50 percent to up to 70 percent for the electricity cost of the eligible consumption. This can cover up to 50 percent of the total consumption of the beneficiary.

"No additional increase in decarbonization efforts will be required. A cumulation with aid granted under the ETS State aid Guidelines will be possible for up to half of the aid amount granted under Section 4.5 CISAF schemes".

Future plans to mitigate the impact of the Iran war on energy prices may include subsidizing the fuel cost of gas-fired generation, the Commission added.

"While the transition towards a clean economy remains the long-term solution to shield EU companies from the effects of global energy shocks, the METSAF allows Member States to act immediately to make sure that the growth of the most exposed companies is not irreparably hampered by the current crisis", the Commission said.

In a speech at the European Parliament's plenary debate Thursday on the energy situation, Commission President Ursula von der Leyen confirmed the EU will launch its Electrification Action Plan by the summer.

"In the current European budget, we have set aside almost EUR 300 billion for energy, EUR 95 billion are still available", von der Leyen said, according to an official transcript. "Let us use this to make the switch to electricity - not just in transport, but also in industry and heating.

"This is not only a matter of affordability and competitiveness, but also of economic security. Thus, speaking of European independence, this is the moment to electrify Europe".

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