The European Commission has recently taken a significant decision that sends a strong signal, especially for the energy-intensive industry in Germany and Europe: The so-called electricity price compensation is being substantially expanded. The aim is to relieve companies in particularly power-intensive sectors more from the indirect CO₂ costs of the European Emissions Trading System, while simultaneously safeguarding climate objectives.
Strengthen competitiveness, safeguard climate protection
The electricity price compensation is a central instrument to cushion the increase in electricity prices caused by the EU Emissions Trading System. After all, emissions trading ensures that CO₂ emissions carry a price — an important signal for climate protection that, however, poses major challenges for energy - intensive companies. To prevent them from relocating production outside Europe (to countries with less stringent environmental regulations), the compensation is applied precisely where it is needed.
With the newly approved expansion, the European Commission is providing greater planning certainty and relief:
Federal Finance Minister Lars Klingbeil has already announced that Germany will implement the relief measures. This will make German industry more competitive again and safeguard jobs. The European Commission also enables its member states, beyond the total of 20 new sectors, to nominate additional industrial branches for compensation if the risk of relocation due to an increased CO₂ price is demonstrated. In addition to the new relief, the Federal Government is continuing to work on an industrial electricity price. This will also benefit companies that are not eligible under the electricity price compensation. First, they must belong to one of the 91 sectors or subsectors from the EU State Aid Guidelines. In addition, as consideration, half of the saved amount must be invested in renewable energies and energy efficiency measures. Following agreement with the European Commission, the industrial electricity price is to apply retroactively from 1 January 2026 and be capped at 5 cents/kWh for half of the total annual consumption.
Why this matters — also for climate protection
The adjustment of the state aid guidelines pursues a dual objective: economic resilience and ecological progress. A strong European industry is a prerequisite for ensuring that technological innovations and sustainable production are not only conceived, but also implemented in Europe.
In this context, the EU points to the risk of so-called carbon leakage: if companies relocate production due to high energy costs or are replaced by more CO₂-intensive imports, no global climate benefits arise — in fact, the opposite. Europe loses economic substance while emissions are merely shifted. The updated aid rules counteract this trend without weakening emissions trading.
The expanded measures show that climate protection and competitiveness are not mutually exclusive; they depend on one another. Targeted electricity price compensation gives European companies the necessary room to invest in sustainable technologies, maintain production sites in Europe and actively shape their transformation. The preservation of industrial value creation in Europe is strategically supported, without deviating from the Union’s ambitious climate targets.
Conclusion
The expanded electricity price compensation is more than a short-term relief; it is a smart, long-term impulse for Europe’s green competitiveness. It protects jobs, keeps production domestic and creates the basis for sustainable industrial growth in harmony with climate protection.
Sources: European Commission, n-tv, Deutsche Börse