EU broadens industry compensation for emissions regulation costs

The European Commission will allow more energy-intensive industries to receive compensation to offset the costs of meeting EU emissions rules, it said on Tuesday, as it seeks to prevent companies from relocating operations outside the bloc.

Under pressure from industries and some member nations, the European Union has broadly moved to ease the burden of legislation aimed at tackling climate change to ensure that European companies remain competitive.

Tuesday's changes loosen rules on so-called state aid, which allows member states to compensate industries for a portion of the higher power bills arising from the additional cost of electricity generation resulting from carbon prices.

The new guidelines should prevent "carbon leakage", which occurs when companies relocate production to countries outside the EU with weaker emission constraints or when EU products are replaced by more carbon-intensive imports, the Commission said.

It extended the list of industrial sectors eligible for compensation under the EU's emission trading system to include 20 new sectors, including the manufacture of organic chemicals and certain activities in the ceramic, glass and battery sectors.

The Commission said the expansion was needed because emission costs have risen significantly in recent years, putting more sectors at risk of carbon leakage than before.