Out of eleven (11) approved national state aid schemes for indirect emission costs of energy-intensive and trade-exposed industries, ten (10)jurisdictions allow beneficiaries to qualify for such state aid by covering at least 

30 % of their electricity consumption from carbon-free sources

 are allowed as a means of sourcing carbon-free electricity in nine (9) countries.

Five to six (5-6) countries (depending on the interpretation of the Spanish regulation), accept electricity from 

carbon-free sources of non-renewable origin

. Based on AIB memberships and the implementation of the EECS rules, this would only enable unbundled use of Nuclear GOs in Finland.

 for sourcing carbon-free electricity but exports and imports from and to Romania and Poland may also be difficult as long as they are not members of the AIB.

 under the state aid schemes indicate so far that 2025 may be a high-impact year.

Carbon-free sourcing requirements under approved state aid schemes for indirect emission costs

The ETS Guidelines and the Decarbonisation of Electricity Consumption

adopted by the EFTA Surveillance Authority (ESA)

, EU/EEA States can compensate activities in certain energy-intensive industries (see below) for increases in electricity prices resulting from the EU Emissions Trading System for the period 2021-2030.

Industries covered by the state aid schemes for indirect emission costs

Beneficiaries of state aid must, according to the ETS Guidelines, conduct an energy audit and:

implement the recommendations of the audit report, to the extent that the pay-back time for the relevant investments does not exceed three years and that the costs of their investments is proportionate; or alternatively

reduce the carbon footprint of their electricity consumption, so as to cover at least 30 % of their electricity consumption from carbon-free sources

invest a significant share of at least 50 % of the aid amount in projects that lead to substantial reductions of the installation’s greenhouse gas emissions and well below the applicable benchmark used for free allocation in the EU Emissions Trading System.

The ETS Guidelines neither define ‘carbon-free sources’ nor lay down any methods for how to source carbon-free electricity. EU/EEA states are given flexibility to tailor their national schemes in this regard. They can also decide to include or exclude the option for beneficiaries to cover at least 30 % of their electricity consumption from carbon-free sources in order to receive state aid. This flexibility has given rise to differences between the national state aid schemes.

To date, eleven national state aid schemes have been approved and adopted for indirect emission costs of industries included in the table above. Of these, only Italy has excluded the option for beneficiaries to qualify for such state aid by covering at least 30 % of their electricity consumption from carbon-free sources. All other countries, where state aid has been approved for indirect emission costs, include this criterion either as an alternative measure to qualify for state aid or as a requirement for receiving such aid (see Table 1). Beneficiaries are under such circumstances, under which they decide or are obliged to source carbon-free electricity, required to do so during a wide range of (not always clearly defined) periods. For instance, beneficiaries can be required to source carbon-free electricity for the years they request aid. The beneficiaries can also be given some time to implement such sourcing strategies. We provide an overview of the theoretical maximum duration of these sourcing periods in Table 1.

Out of the approved state aid schemes, nine recognise unbundled GOs as a means for beneficiaries to cover their electricity consumption with carbon-free sources. Other options mentioned for securing carbon-free electricity supply is via on-site power generation orentering into power purchase agreements (PPAs). As a complement to these approaches, the French authorities assess state aid applicants based on the national production mix of the year preceding the year for which aid is requested. As the country, based on our interpretation of the regulation, accepts electricity from carbon-free sources of non-renewable origin (categorised as ‘non-RES-E Carbon Free Option’ in Table 1), this requirement should have no impact as nuclear dominates the country’s electricity production. Four or five more countries (depending on the interpretation of the Spanish regulation) also accept electricity from carbon-free sources of non-renewable origin.

Out of the approved state aid schemes, the German regulation is the only one that specify a market boundary for how much carbon-free electricity that can be sourced from different jurisdictions (see Table 1). However, Poland and Romania are not members of the AIB so export and imports of GOs to and from these jurisdictions are technically difficult.

Based on the examination of the different state aid schemes, we can see that eight jurisdictions directly affect the GO market (if we exclude France for its seemingly easy-to-obtain carbon-free threshold). While four to five countries theoretically could allow for the use of Nuclear GOs, AIB memberships and current import and disclosure regulations ought to limit this ability to Finland alone. This should direct the state aid impact on unbundled GO trade almost exclusively to Renewable GOs. However, it is imperative to remember that sourcing unbundled GOs is only an alternative for beneficiaries to meet the state aid qualification criteria.

Where unbundled GOs are favoured as means of beneficiaries’ carbon-free sourcing strategies, AIB membership affects the geographical scope from which beneficiaries easilycan source GOs. Thus, beneficiaries in non-AIB member countries, i.e. Poland and Romania, may be pushed to use GOs from within the respective national GO markets. This could result in greater bullish impacts on GO prices in these countries. The same applies for GOs from the Central Western European countries (Germany, Austria and Luxemburg), since Germany favours carbon-free sourcing methods from these countries.

In terms of vintage, we can expect to see an increasing uptake of carbon-free sourcing strategies within the industries of Table 2 in the coming years, with a peak in 2025, based on the joint impact of the theoretical maximum carbon-free sourcing periods included in Table 1. This may change, however, if countries with state aid schemes that runs until 2025 take decisions to extend their schemes, or more countries implement national state aid schemes. We will keep our clients updated on these developments.

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We have previously written about the potential of 

. The number of national schemes has now reached eleven, with the 

European Commission’s approval of the French scheme in December 2022

 being the latest addition. As the number of national state aid schemes has increased, this article provides greater insights into some differences between the schemes and how these differences affect the GO market.

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Comparison of National ETS State Aid Schemes with Impact on the GO Market

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