Statement on “Draft guidelines on State aid for climate, energy and the environment”

BACI expressed the following statement to the Council of Ministers and a number of ministries on the review of the “Draft Guidelines on State Aid for Climate, Energy and the Environment” (“Draft Guidelines”).

As you are aware, the European Commission is currently revising the “Draft Guidelines for State Aid for Climate, Energy and Environment” (the “Draft Guidelines”). According to the Draft Guidelines as published on 7th June 2021, the cement industry would no longer be eligible for exemptions from electricity levies. In submitting comments into the Commission’s public consultation, our European association CEMBUREAU pointed to the disproportionate focus on trade intensity in the Draft Guidelines’ assessment which is now facing a threshold of 20% instead of 10%. At a 20% trade intensity, 36 million tonnes of cement production representing 60-70 plants or 29% to 34% of total plants in the EU would be at risk.     

The urgency of this matter has increased with the impact of the rising energy prices. With 40% of the cement industry’s operational cost linked to energy, half of which is electricity, the sharp increase in energy prices is forcing some of our plants to slow down production.

The year-ahead power prices have sharply increased all over Europe between October 2020 and November 2021 with price levels doubling and even tripling. The competitiveness in our operations is further negatively affected by a strong increase in imports from non-EU countries. Between 2016 and 2020, imports from third countries into Bulgaria have increased by 172%, but at a trade intensity exceeding 20% in the first half of 2021 – all according to public data from NSI. This level of cement trade intensity is the highest among all EU countries for cement and reflects the difficulties that the Bulgarian cement producers are facing from constantly increasing imports.

While we welcome the European Commission’s Communication “Tackling rising energy prices: a toolbox for action and support” (the “Communication”), published on 13th October, we are of the strong opinion that the measures that have been announced as part of that toolbox and, most notably, the possibility for Member States to provide state aid, need to be looked at in conjunction with the ongoing discussions on the eligibility for such aid in the Draft Guidelines. In their current form, the Draft Guidelines will not only exclude exposed sectors from receiving the essential support which is available today, they create a further barrier to Member States swiftly implementing necessary measures to weather the current energy price crisis as envisaged by the Commission’s toolbox, thereby exacerbating loss of competitiveness and accentuating cost inflation for consumers.

The abrupt non-eligibility of the cement sector under the Draft Guidelines comes at a time where investments in the built environment need to increase dramatically with new sustainable buildings to cover the population’s needs and major transport infrastructure projects which are essential pillars for a well-functioning economy. All of these developments require building materials to be affordable. We also wish to point out that non-eligibility under the Draft Guidelines would put the cement industry at a competitive disadvantage compared to sectors that are eligible and compete on the same downstream construction market such as the steel sector.

For the reasons set out above, we would appreciate if you could insist with the Commission to maintain the current eligibility criterion in the draft guidelines specifically, a trade intensity of 4% and an electro-intensity of 20%;