Brussels minimally extends energy subsidies for businesses

16, Nov - NEWS

Brussels decided: only some of the generous energy subsidies authorized to help member states mitigate the impact of soaring gas and electricity prices will be extended, and only for a minimum period. France and Germany, which had favored a longer extension, will no doubt be disappointed.

These emergency measures were introduced in March in response to the energy crisis caused by Russia's invasion of Ukraine. At that time, the Commission more than doubled the caps on state aid in some cases.

A number of these measures were due to expire on December 31, 2023, and others in 2025. However, according to our information, most Member States were in favor of extending these measures. Only Belgium, Estonia, the Netherlands, Finland, Estonia, Finland and Denmark were opposed.

Three more months

For its part, the Commission initially wanted to phase out the aid, which was due to end on December 31, 2023. It made this clear to the 27 Member States at the end of July, pointing to an improving economic outlook, a good level of gas in storage and a low risk of shortages.

The member states apparently managed to persuade her to split the difference but not twist her arms.

Tough talks in Brussels on maintaining energy subsidies for businesses

Brussels said Monday night that it was voting for a "limited three-month extension", i.e. until March 31, 2024, and only for part of the aid. Only measures related to limited amounts of aid and measures aimed at offsetting high energy prices, which were due to expire at the end of 2023, are being extended. But not the liquidity support measures and the measures to support electricity demand reduction, which will therefore end on December 31.

"This will allow Member States to extend their support schemes and ensure that businesses still affected by the crisis are not deprived of the necessary support during the next winter heating period," states the Commission.

The message is thus clear: the aim is to maintain a minimum level of support for the winter, just in case, as this is when prices usually rise. As Competition Commissioner Didier Reynders notes, "despite the surprising resilience of the EU economy, there is still a lot of uncertainty about energy prices next winter."

No gifts for Paris and Berlin

There will also be no gifts for France and Germany, which have called for the extended bailout to be extended until the end of 2024. "Some companies have signed long three-year contracts with high tariffs and they are only half or two-thirds fulfilling them. The subsidies allow them to pay for themselves. That's why Paris and Berlin wanted to combine the end of subsidies with the end of contracts," a European diplomat explains.

"Member States can only continue to provide support by covering part of the additional energy costs if energy prices are significantly above pre-crisis levels," states the Commission.

State aid: Germany smashes all European meters again

On the other hand, the EU plans to keep other aid under the same emergency package aimed at accelerating renewable energy and decarbonization measures until December 2025 as planned. Germany has once again demanded an increase in this specific aid. A few weeks ago, Chancellor Olaf Scholz said, "I will put pressure on Brussels to extend this scheme until 2027."

Ultimately, it is also in the Commission's interest not to appear too much in favor of Paris and Berlin, which are regularly singled out as the largest providers of state aid in the EU. However, overstretching subsidies could lead to an internal market imbalance where poorer countries are unable to help their businesses to the same extent as richer ones. The Commission remains very sensitive to this issue.