Executive Summary:
- Energy intensive users may benefit from reduced energy taxes so that there is a lower risk of their relocation to non-EU countries with no or limited environmental restrictions.
- However, the impact of the combined relief from several energy and other environmental taxes on the risk of relocation is not examined by current state aid rules.
Table of Contents:
Introduction
Even since the Russian invasion of Ukraine and the subsequent increase in the prices of energy and raw materials, there has been a debate on the right balance between energy security and climate targets. Although this debate has been rekindled and become more urgent as a result of the war in the Gulf region, the EU has not yet identified where that balance lies. This is despite the many initiatives and proposals that have come out of Brussels. Perhaps the right balance is transitory and, for this reason, unachievable as it shifts with any significant new development.
The difficulty of striking the right balance between competing policy objectives is also reflected in the application of state aid rules. The aid measure which is examined in this article seeks to achieve two opposite policy objectives at the same time.
In March 2023, the Commission, in case SA.102006, approved the reintroduction of a Spanish scheme for the support of energy intensive users [EIU]. The initial scheme was approved in January 2021 in case SA.54558. In April 2026, Spain notified new amendments to that scheme which were approved by the Commission at the end of July 2026, in case SA.123095.[1] This article reviews the Commission’s decision on this latest version of the scheme.
The basic feature of the scheme is the reduction of certain charges paid by EIUs. Those charges generate revenue for the support of electricity production from renewable energy sources [RES] and promotion of combined heat and power [CHP]. These charges are paid by all final electricity consumers, including EIUs, which are a fixed component for each kWh of electricity consumed.
Eligible undertakings must operate in at least one of the sectors identified “at risk” or “at significant risk” of relocation to jurisdictions where environmental discipline is absent or less ambitious. These sectors are listed in Annex 1 of the guidelines on state aid for climate change, environment protection and energy [CEEAG].
As explained in the Commission decision, “(10) under the existing measure, in order to qualify for the certification as electrointensive user, undertakings have to meet, inter alia, the following cumulative conditions …:
(a) During at least two of the previous three years, having an annual electricity consumption of more than 1 GWh;
(b) For any of the previous three years, having consumed at least 46% of their electricity during the hours corresponding to the off-peak tariff period; and
(c) For at least two of the previous three years, having at installation level a minimum ratio between annual consumption and gross value added (“GVA”) exceeding 0.4 kWh/EUR. This ratio is reviewed annually, in line with the average electricity market price of the preceding year, to ensure that each year the ratio corresponds to an electro intensity of 5%. In 2022, the applicable ratio equalled 0.25 kWh/EUR.”
“(12) Reductions on the compensable levies take the form of an ex-post compensation …, on the basis of the observed levels of electricity consumption related to activities in the eligible sectors. The maximum compensation … is equal to 85% of the compensable levies charged on eligible installations of undertakings operating in sectors at significant risk and 75% of the compensable levies charged on eligible installations of undertakings operating in sectors at risk.”
“Compensable levies” are the charges borne by electricity consumers before any state aid.
“(13) In addition, annual calls may provide that the maximum aid intensities may exceed these limits as follows …:
(a) For beneficiaries operating in sectors at significant risk, the cost of the compensable levies can be further limited to 0.5% of their GVA. The aid amount will not exceed the aid resulting from capping the cost of compensable levies at undertaking level to 0.5% of the GVA of the concerned undertaking.
(b) For beneficiaries operating in sectors at risk, the cost of the compensable levies can be further limited to 1% of their GVA. The aid amount will not exceed the aid resulting from capping the cost of compensable levies at undertaking level to 1% of the GVA of the concerned undertaking.”
“(14) To determine the aid amounts, the GVA used is the arithmetic mean over the previous three years for which GVA data is available and is calculated, by reference to the concepts of the Spanish General Accounting Plan, having regard to the definition of point 411 of the CEEAG”.
The amended measure
The main objective of the amended scheme remains to disincentivise companies which incur high costs of energy and environmental compliance through levies and which are exposed to international competition from relocating to countries where these costs are not incurred at all or are not as high.
According to the Commission decision, “(25) the amendments to the existing measure notably concern the extension of the scope of the scheme to include a reduction for EIUs in the contribution by electricity consumers under the so-called National System of Energy Efficiency Obligations (“SNOEE”), which aims to achieve Spain’s energy efficiency targets.”
“(31) The amended scheme introduces a reduction for EIUs in relation to the payment of an additional charge, namely of the contribution under the SNOEE (“SNOEE contribution”), in addition to the reduction in the levies already compensable under the existing measure, the scope of which remains unchanged as to the remainder.”
The objective of SNOEE is to incentivise companies to increase their energy efficiency, something that is probably more important, the higher the consumption of energy per unit of output of each company.
“(32) The SNOEE was established by Law 18/2014 of 15 October 2003, approving urgent measures for growth competitiveness and efficiency, which, aiming to achieve Spain’s energy efficiency targets, provided for a National Energy Efficiency Fund (“FNEE”) together with a System of Energy Savings Certificates (“CAE certificates”), as alternative policy measure in the sense of Article 10 of Directive (EU) 2023/1791 (the “Energy Efficiency Directive”). The implementation of the system of the CAE certificates is regulated in Royal Decree 36/2023, certain provisions of which are also implemented by Ministerial Order.”
“(33) The contribution to the SNOEE is defined annually as a savings contribution for each obliged entity expressed in energy savings units (MWh), taking into account information submitted by the entities on their final energy sales in the national market in the previous year. The same Ministerial Order provides for the annual SNOEE savings target, and the financial equivalence allowing for the transformation of the savings contribution into a monetary contribution to be paid to the FNEE. In 2026 the financial equivalence has been set at 198,62 EUR/MWh.”
Therefore, the total eligible costs under the notified amendment are the sum of the compensable levies under the existing scheme and the sum of the SNOEE contributions.
Compatibility assessment
Since the Commission had already found that the initial scheme and first amendment constituted state aid, it examined quickly the features of the second amendment and concluded that the revised scheme was also state aid. Therefore, the Commission proceeded to assess its conformity with the requirements of CEEAG which in point 16(l), refers to “(53) ‘aid in the form of reductions from electricity levies for energy-intensive users’ among a number of categories of environmental protection and energy measures in respect of which State aid may be compatible with the internal market under Article 107(3)(c) TFEU”.
With respect to the contribution of the scheme to the development of an economic activity, the Commission observed that “(59) in the 2023 Decision, the Commission concluded that the existing measure facilitates the development of an economic activity. In particular, the Commission noted that (i) the existing measure facilitated the development of the economic activities carried out by EIUs with a high electro-intensity and exposure to international trade and that (ii) in the absence of the existing measure, the economic consequences might lead to a shift of production towards other regions outside the EU, to a reduction of the European market share globally, or to investment plans that would not take place within the EU borders”.
“(60) The amendments to the existing measure do not alter those conclusions that the scheme at issue has an incentive effect and facilitates the development of an economic activity.”
“(61) In particular, …, the amended scheme continues applying only to economic sectors that are listed in Annex 1 to the CEEAG, which are particularly exposed to international trade and rely heavily on electricity for value creation. Reductions are granted only on charges on electricity consumption, which finance energy and environmental policy objectives and which do not reflect the costs of providing electricity to the beneficiaries in question, in line with point 403 of the CEEAG … The main objective of the amended scheme remains the reduction of the risk of relocation of eligible undertakings due to high levies on electricity consumption financing energy and environmental policy objectives”.
“(62) Moreover, in line with point 404 of the CEEAG, the Spanish authorities have informed the Commission of the cumulative effect of the new eligible levy and reduction proposed …, which, together with the effect of the compensable levies …, shows that in the absence of the scheme, the economic burden of the full amount of the levies on the targeted undertakings would be significant. The scheme thus reduces the risk, compared to the counterfactual scenario, that the costs linked to the electricity levies entail the relocation of eligible EIUs to areas or countries where these costs are not incurred at all or are not at such an intensity.”
This justification raises two questions that the Commission decision does not answer. First, SNOEE was established in 2003, before the initial scheme was adopted in 2020 or the first amendment in 2022. Why was a reduction in the SNOEE levy not included in the initial scheme, given that is objective was to lower the risk of manufacturing relocation? In other words, has the risk of relocation increased over the past couple of years that there is now need for additional disincentives and additional aid in the form of lower energy taxes? The decision does not distinguish between the necessity of aid in the context of the initial measure and the necessity of aid in the context of the second amendment.
Second, unlike the other energy taxes which penalise the use of fossil fuel and aim to generate revenue for RES and CHP, SNOEE seeks to incentivise energy efficiency. Given the dependency of EIUs on energy, this is something that EIUs themselves ought to pursue. Reduction of the SNOEE rate also reduces the incentive for energy efficiency and therefore raises the cost disadvantage of EIUs in relation to their non-EU competitors. Why did the Commission not examine the effect of the apparent contradiction between disincentivising relocation and disincentivising energy efficiency that increases the risk of relocation?
The Commission, nonetheless, proceeded to confirm the compatibility of the scheme in accordance with all the conditions laid down in CEEAG.
