The European Commission approved new support schemes by Austria and Spain to help compensate energy-intensive industries for higher electricity costs linked to carbon pricing under the European Union Emissions Trading System (EU ETS).
The schemes are designed to reduce the risk of carbon leakage, where companies relocate production outside the EU to regions with less stringent climate policies, potentially leading to higher global greenhouse gas emissions.
The EU ETS, established in 2005, is the EU’s cap-and-trade carbon pricing system covering major emissions-intensive sectors such as power generation, steel, cement, chemicals, paper, and aviation.
Amid rising energy prices in Europe—initially driven by the Russia-Ukraine conflict and further intensified by geopolitical tensions involving Iran—several EU member states have urged the Commission to review the ETS framework to ease industrial cost pressures. In response, European Commission President Ursula von der Leyen announced plans for near-term ETS revisions, with a broader review expected in July 2026.
Under Austria’s newly approved scheme, eligible companies can receive refunds of up to 75% of ETS-related indirect emissions costs incurred through electricity consumption, with final payments scheduled by 2030. Compensation levels will be linked to electricity efficiency benchmarks to encourage energy savings.
The Austrian scheme targets sectors considered both energy-intensive and highly exposed to international competition, including iron and steel, aluminum, paper, and chemicals. Beneficiary companies must invest at least 80% of the aid received into energy efficiency improvements or other decarbonization initiatives. The European Commission approved the scheme with a total budget of up to €900 million.
Spain’s updated scheme expands an existing ETS compensation framework by extending eligibility to additional sectors identified as being at risk of carbon leakage. The amendment also increases the maximum aid intensity from 75% to 80% of indirect emissions costs.
