Romania has been given the green light for a €1.5 billion (£1.3bn) scheme to partially compensate energy-intensive companies for indirect emission costs.

It will cover part of the higher electricity prices arising from the impact of carbon prices on electricity generation costs, i.e. indirect emission costs, incurred between 2021 and 2030.

The measure aims to reduce the risk of ‘carbon leakage’, where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting in increased greenhouse gas emissions globally.

The compensation will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2031.

The maximum aid amount will be equal to 75% of the indirect emission costs incurred.

To qualify for compensation, companies have to either implement certain energy audit recommendations, cover at least 30% of their electricity consumption with carbon-free sources or invest at least 50% of the aid amount in projects leading to substantial reductions of their installations’ greenhouse gas emissions.

Companies must comply with one of the three obligations within three years from the aid being granted.

Executive Vice President Margrethe Vestager, in charge of competition policy said: “This €1.5 billion scheme supports Romania in its ambition 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.”