New carbon leakage regulation places higher demands on companies
Our legal register team has important information for all manufacturing companies that are subject to emissions trading:
In order to eliminate competitive disadvantages in the context of national fuel emissions trading, the Federal Cabinet adopted the BEHG Carbon Leakage Ordinance (BECV) on March 31, 2021. Approval by the Bundestag and the EU Commission is still pending.
Carbon leakage generally refers to the relocation of CO2 emissions to third countries. The reason for this can be the competitive situation to which a company is subject. If the price of CO2 rises and the company is unable to pass on the resulting higher product prices to customers due to competition, there is a risk that the company will relocate production abroad, where emissions trading does not apply. This undermines the actual goal of reducing greenhouse gases in Germany and the EU.
The BECV is based on the EU ETS (the European Emissions Trading Scheme), but sets higher requirements for companies that want to receive compensation for the higher costs from emissions trading. The relief is designed to be more restrictive and combines two requirements. Only companies and independent parts of companies that can be allocated to a sector or sub-sector at risk of carbon leakage are eligible to receive aid. Applicant companies must prove (from 2023) that they meet a minimum emission intensity in order to receive a compensation level of 65 to 95%, depending on the sector. There is a deductible of 150 tons of CO2, which is not eligible for offsetting. The EU fuel benchmark adds further factors that lead to a reduction in the level of offsetting. For example, the use of natural gas leads to higher relief than the use of coal.
Only fuel consumption that arises in the manufacture of products that are assigned to a sector at risk of carbon leakage is eligible for aid. If fuel consumption also occurs in other sectors or areas of the company, these are not taken into account in the context of the relief.
Eligible companies must also provide counter-performance. For example, the introduction or operation of an energy management system in accordance with ISO 50001 or an environmental management system in accordance with EMAS is mandatory for companies with an annual energy consumption of more than 10 GWh. The requirements are not as stringent for organizations with lower consumption. In addition, a certain proportion of the relief amount must be reinvested in climate protection and efficiency measures.
Our legal cadastre team expects the BECV to come into force in the middle of the year. If your company is affected by the regulation, we will be happy to advise you - including on the introduction and improvement of your energy and environmental management system in accordance with EMAS or ISO 50001.
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