The Bulgarian Council of Ministers approved a draft law to supplement and amend the Climate Change Mitigation Act (CCMA) with a new mechanism to support industrial concerns that face increased electricity prices and decreased competitiveness resulting from carbon leakage and the indirect costs of greenhouse gas emissions.
The state aid scheme will be implemented through an ordinance from the Ministry of Economy, which will determine the enterprises that will benefit from this aid and how it will be distributed.
The ordinance will determine the terms for providing the aid and a schedule for gradually decreasing the subsidy in order to avoid overcompensation.
The new subsidy will be applicable as soon as it is approved by the European Commission. Up to 25% of the revenue generated from the sale of Bulgarian greenhouse gas emission allowances will be used for this purpose.
In 2019, eligible enterprises could receive aid of up to EUR 95 million, which is currently allocated to the Security for the Electricity System Fund, the Contract for Difference (CfD) counter-party in Bulgaria. This allocation could also allow eligible enterprises, which numbered as many as 200 Bulgarian companies in 2016, to receive additional state aid of up to EUR 250 million.
Enterprises that dispose of carbon emissions above their allowance should purchase quotas for greenhouse gas reduction commitments. Over the past year, prices have risen by nearly 130% from EUR 8 per tonne of carbon dioxide to EUR 25 with prices estimated to reach over EUR 30.
This has lead to an increase in industrial electricity costs of about 40% last year. State aid through the amended CCMA would lead to some relief for the most badly hit energy consuming industries.
In addition to this state aid, the Ministry of Energy has drafted rules for granting free greenhouse gas allowances to power plants and transmission-distribution companies between 2021 and 2030 if they invest to reduce carbon dioxide emissions.
Energy producers with nominal thermal power of more than 20 MW (excluding hazardous or solid waste installations) and transmission-distribution operators will have access to this aid. To qualify for free greenhouse gas allowances, however, these operators must launch projects to modernise, diversify energy use with a focus on renewables and reduce their carbon footprint. Energy infrastructure rehabilitation projects will be also supported.
Additional conditions are expected to qualify for this aid. Companies will not be eligible for support if they have unpaid liabilities, obligations to repay other state aid or are operating under a recovery plan.
The planned investments should be equal to the market value of free greenhouse allowances determined on the basis of the average annual price of CO2 allowances on the European Trading Platform for the preceding year.
The free allowances will be auctioned in two groups: investments of EUR 12.5 million and above and investments below this number.
For more information on these industrial subsidies, contact your regular CMS source or one of the local CMS experts.
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