At the behest of Berlin: Brussels paves the way for industrial subsidies

Brussels will approve subsidies for the operating costs of EU companies to prevent energy-intensive industries from moving to countries with cheaper electricity prices. This brings the EU Commission closer to meeting German demands for an industrial electricity price.

The EU actually prohibits state aid to prevent a country from favoring its domestic companies and distorting the EU's internal market. However, over the decades, a practice has developed that investment aid is sometimes acceptable, but the assumption of operating costs for otherwise underperforming companies is not.

From Wednesday, Brussels will give EU member states the green light to grant companies a discount of up to 50 percent on half of their electricity consumption, which corresponds to a subsidy of up to a quarter of their electricity bill, provided the total costs do not fall below 50 euros per megawatt hour.

"If Europe wants to be a leader in clean technologies, we must act boldly and clearly," said Teresa Ribera, EU Competition Commissioner. The plan will "make energy systems more stable, affordable, and fairer" while avoiding "distortions" of the EU's internal market, she added.

The measure, which several senior EU officials have described as a "departure" from Brussels' usual approach, is expected to remain in force until 2030.

"It is remarkable that the Commission is willing to allow operating cost compensation of this magnitude," said Joachim Schmitz-Brieber of the EPICO think tank. "Until now, this was only conceivable in exceptional cases," he added.

This step signals “how seriously Brussels appears to be taking the risk of industrial relocation.”

Companies that can benefit from the new state aid rules range from mining companies to steel producers, industries that consume a lot of electricity and are increasingly under pressure from foreign competitors.

The change of course follows concerns raised by the Commission about the competitiveness of energy-intensive EU companies compared to their Chinese and US competitors, which benefit from significantly cheaper electricity and gas prices.

This move by Brussels is welcomed by the larger EU countries, particularly Germany and France , which have long called for looser state aid rules to support their struggling industries.

Smaller member states argue that looser rules would fragment the EU's internal market, as economically strong EU countries with their larger budgets would be unfairly favored.

Federal Minister for Economic Affairs Katherina Reiche welcomed this step by the EU. She now plans to present a concept for an industrial electricity price.

(om)