The European Commission has given the go-ahead for a €1.4 billion (£1.17bn) Czech scheme to compensate energy-intensive companies for indirect emission costs.

The measure will cover part of the higher electricity prices arising from the impact of carbon prices on power generation costs incurred between 2021 and 2030.

The support scheme is aimed at reducing the risk of “carbon leakage”, where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting in less economic activity in the EU and no reduction in greenhouse gas emissions globally.

Eligible companies in the Czech Republic will receive the compensation through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2031.

In order to qualify for compensation, companies will have to either implement certain energy audit recommendations or cover at least 30% of their power consumption with carbon-free sources.

Margrethe Vestager, Executive Vice President, in charge of competition policy, said: “This €1.4 billion measure will allow Czechia to reduce the risk of carbon leakage for its energy-intensive industries. At the same time, the incentives for a cost-effective decarbonisation of its economy will be maintained, in line with the Green Deal objectives and undue competition distortions will be limited.”