Brussels gives European governments more room to dampen energy prices for companies

Of course, European Commissioner Teresa Ribera (Climate and Competition) said on Wednesday: the best way to deal with high energy prices due to the war in the Middle East is to get more energy from green, home-grown sources. But the energy transition takes time, Ribera continued, and high prices also require “immediate answers.”

That is why the European Commission is giving national governments in EU countries more space to help companies. They may compensate farmers, fishermen, transport companies and energy-intensive industry for the increased oil and gas prices. Brussels is therefore putting its strict rules on state aid on the back burner, at least until the end of this year.

Brussels has always emphasized that any measures must be “targeted and temporary”. Last week, the Commission had already expanded the options for national governments to help citizens, through income support schemes, energy vouchers, social leasing programs (for example for electric cars) and lower electricity taxes.

Two options

Support for companies requires a little more fiddling due to state aid rules. Brussels gives governments two options to compensate companies in agriculture, fishing and land and water transport. They can reimburse up to 70 percent of the price increase for fuel and coastal fertilizer, or pay out standard compensation of up to 50,000 euros per company.

For the energy-intensive industry – where steel companies and the chemical sector, among others, suffer from high prices – governments may compensate as much as 70 percent of electricity costs (which rise with gas prices) without violating state aid rules. The rules for the sector were already relaxed last summer and are now being stretched further.

A notable absence from the list is aviation. Airlines are suffering from higher kerosene prices, but according to the Commission, this does not justify relaxing the rules for this sector. It is a sign that the Commission wants to remain cautious, especially after the 2022 energy crisis led to expensive interventions in most EU countries.

“During the previous crisis, only a quarter of emergency aid went to vulnerable households and companies,” European Commission President Ursula von der Leyen said in the European Parliament in Strasbourg on Wednesday morning. “More than 350 billion euros went to untargeted measures.”

Many governments opted for generic energy price ceilings and excise duty reductions. That unbridled aid put a heavy burden on government finances, according to Von der Leyen, and meant that less money went to vulnerable groups. “Let’s not make the same mistake again and focus our support where it is needed most.”

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