EC endorses UK Carbon Reduction Commitment scheme

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The European Commission has authorised under EC Treaty state aid rules a scheme proposed by the United Kingdom introducing a trading system for CO 2 emissions related to energy consumption. The national system, called ‘the Carbon Reduction Commitment’ (CRC), applies to non energy intensive sectors not covered by the EU Emission Trading system. All allowances in the CRC system would be sold by auction. Participants’ environmental performance would be ranked in a performance league table, and the auction revenue would be paid back to participants as a subsidy. Participants ranked on the top of the Performance League Table would benefit the most from the recycling mechanism. The measures are in line with the Article 87(3)c of the EC Treaty because it pursues an objective of common interest in a necessary and proportionate way.

The system proposed by the UK is a novel way for inducing changes in companies’ behaviour through a set of incentives, including a trading system of CO 2 certificates covering emissions triggered by the use of energy, a ‘name-and-shame-policy’ publishing the environmental performance of participants and financial incentives in the form of additional grants financed through the revenues achieved in auctioning emission permits.

The Commission’s investigation found that participation in the trading mechanism involving the redistribution of the auctioned revenues contains state aid, as beneficiaries receive an economic advantage from the state. However, the aid has been declared compatible with the EC Treaty directly under Article 87(3) c because it pursues an objective of common interest in a necessary and proportionate way. In particular, it clearly targets a reduction of CO 2 resulting from energy use that goes beyond what is required by the applicable EU legislation, and it is well designed to deliver this objective of common EU interest. The measure is proportional and it will induce a change in the behaviour of the participating companies (i.e. there is an incentive effect). Moreover, the distortions of competition resulting from the introduction of the scheme will be limited, because of the relatively small amounts of money involved in the State aid and the low proportion of energy costs in the total operating costs of the benefiting companies.

The non-confidential version of the decision will be made available under the case number N 629/200 8 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .

Source: European Commission, Competition DG

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