EU May Allow Aid to Energy-Intensive Firms Defended by Merkel

The European Union is considering allowing governments to help industries with high energy bills after German Chancellor Angela Merkel vowed to defend the country’s aid program for big power users.

The EU’s regulatory arm may approve partial support to some businesses, Joaquin Almunia, the EU’s competition chief, said today concerning new state-aid guidelines to be adopted in the first half of 2014. The European Commission, which held initial discussions on the matter yesterday, will seek views on draft plans before the end of this year.

“We need to give this kind of advantage on a temporary basis, not forever,” Almunia told reporters in Brussels today. The question is “how long or how small” the list of industries eligible for energy subsidies will be, he said.

The aid talks come as the U.S. shale-gas revolution widens the EU’s cost gap with its largest trading partner and the bloc prepares to review a list of companies, including energy-intensive businesses, which are eligible for a bigger share of free permits in the emissions trading system, or ETS. Merkel said this year that power-fee waivers granted to energy-intensive companies, ranging from Bayer AG (BAYN) to HeidelbergCement AG (HEI), are vital for the German economy’s global competitiveness.

State aid granted to companies on a selective basis, which can span from tax relief to government guarantees, is illegal under EU law unless justified by reasons of general economic development. The commission, which enforces these rules, plans to have specific rules for energy-intensive industries.

German Waivers

Germany granted power-fee waivers to 1,716 companies or units and worth about 4 billion euros, according to data from the country’s authorities.

Merkel said in July that Germany would “fight resolutely” in Brussels for the waivers, which free companies from paying the full fee to support the country’s clean-energy expansion.

She has said competitive energy prices are key to the country’s industry as it shutters nuclear reactors and seeks to increase the share of renewables to 80 percent of the power mix.

The commission will use “similar criteria to the ones used in the ETS guidelines” to decide which energy-intensive sectors are eligible for partial compensation, Almunia said.

Under the carbon-linked recommendation adopted last year, aid for companies must not exceed 85 percent of eligible costs from 2013 through 2015, falling gradually to 75 percent in 2019-2020.

Industries that were classified as being at a genuine risk of relocating production to regions without emission curbs and can be offered compensation include producers of aluminum, copper, fertilizers, steel, paper, cotton, chemicals and some plastics.

To contact the reporters on this story: Gaspard Sebag in Brussels at gsebag@bloomberg.net; Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net; Anthony Aarons at aaarons@bloomberg.net

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