EU ETS state aid expansion widens indirect carbon cost compensation for 20 new sectors

EU ETS 

EU ETS state aid expansion now lets more industries claim indirect carbon cost compensation. EU ETS state aid expansion applies to higher electricity costs tied to the EU emissions trading system. As a result, eligible firms can seek support for costs incurred from January 1, 2025.

The European Commission adopted amendments to its state aid guidelines. The changes add 20 sectors and two sub-sectors to the eligibility list. Meanwhile, the commission aims to reduce carbon leakage risk across energy-intensive supply chains.

Which industries qualify and how the compensation works

Indirect carbon cost compensation now covers organic chemicals, fertilizers, ceramics, glass, and batteries. The expanded list also includes mining of iron and non-ferrous metal ores. It also adds primary plastics manufacturing, which supports broad industrial value chains.

The aid can cover up to 75% of eligible indirect emissions costs for newly added sectors. Meanwhile, previously eligible sectors can now claim up to 80% coverage. Therefore, electricity-intensive producers gain stronger protection against ETS-driven power cost shocks.

What it means for metals, batteries, and EU industrial competitiveness

EU ETS state aid expansion supports investment stability in metals and battery supply chains. Higher power prices often drive curtailments in smelting, refining, and upstream processing. As a result, this policy can help keep capacity online through volatile energy cycles.

The amendment also introduces a tighter “payback” logic for large beneficiaries. Large recipients must invest part of the aid into projects that reduce electricity system costs. However, implementation will vary by member state, so timelines and enforcement will differ.

Member states can also compensate sectors not listed in the guidance. They must show robust evidence that those sectors meet the criteria. Meanwhile, the commission updated country emissions factors used for 2026–2030 calculations, which can shift aid outcomes by region.

The Metalnomist Commentary

This expansion signals Europe’s focus on holding strategic industrial capacity during decarbonisation. However, subsidies cannot replace long-term solutions like grid upgrades and cheaper clean power. The winners will pair compensation with efficiency and flexible operations.