Technical updates of the Emissions Trading System (ETS) State aid guidelines

Carbon Market Watch argues that indirect cost compensation under the EU ETS should be phased out rather than expanded to new sectors. The organization identifies several flaws in the current State aid guidelines, including the use of fossil-fuel-only generation capacity to determine CO2 emission factors and a lack of transparency regarding which companies receive aid. It specifically warns that including primary plastics and organic chemicals in the compensation scheme would subsidize fossil-fuel-reliant production and undermine circular economy efforts.

• Carbon Market Watch opposes the European Commission's consideration of expanding indirect cost compensation to more sectors, stating that carbon leakage measures are intended to be temporary and should be phased out.
• The current method for determining regional CO2 emission factors is flawed because it relies solely on fossil fuel generation capacity, which leads to industrial overcompensation and ignores the decarbonization of the power sector.
• Expanding compensation to the manufacturing of primary plastics and organic chemicals is viewed as problematic because it risks subsidizing fossil-fuel-based primary production and hindering circularity and material efficiency.
• There is a critical lack of transparency at the EU level regarding the implementation of these guidelines, with no public data available on the specific companies or installations receiving compensation or the climate impact of such aid.
• The organization recommends the introduction of a sunset clause and degressive aid intensity to prevent aid dependency and ensure the eventual phase-out of indirect cost compensation.

APA

Tamellini, L. (2025). Technical updates of the Emissions Trading System (ETS) State aid guidelines. Carbon Market Watch. https://carbonmarketwatch.org/wp-content/uploads/2025/09/202508219-CMW-Indirect-cost-compensation-ICC.pdf

Chicago

Tamellini, Lidia. Technical updates of the Emissions Trading System (ETS) State aid guidelines. Carbon Market Watch, 2025. https://carbonmarketwatch.org/wp-content/uploads/2025/09/202508219-CMW-Indirect-cost-compensation-ICC.pdf.

Wikipedia

{{cite press release |last1=Tamellini |first1=Lidia |title=Technical updates of the Emissions Trading System (ETS) State aid guidelines |publisher=Carbon Market Watch |date=5 September 2025 |url=https://carbonmarketwatch.org/wp-content/uploads/2025/09/202508219-CMW-Indirect-cost-compensation-ICC.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{tamellini2025technical, author = {Tamellini, Lidia}, title = {{Technical updates of the Emissions Trading System (ETS) State aid guidelines}}, publisher = {Carbon Market Watch}, year = {2025}, month = sep, url = {https://carbonmarketwatch.org/wp-content/uploads/2025/09/202508219-CMW-Indirect-cost-compensation-ICC.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }