EU approves €2.9bn in German industrial aid

At Slovalco, Slovakia's only aluminium smelter, the government recently pledged nearly €470m through 2030 to cover electricity costs and keep the furnaces running (Denník E). It was framed as an exceptional rescue. Then Germany secured something much larger.

On 8 July, the European Commission approved an expansion of Berlin's electricity-price compensation, a programme that reimburses energy-intensive factories for the carbon cost that power producers pass on through electricity prices. Around 20 new sectors can now claim support, from glass to batteries, and existing recipients get slightly higher coverage (Spiegel, BBH Blog). This was the second expansion in weeks: in June, Brussels also let Germany stack this compensation with a separate industrial electricity programme, adding roughly €1bn in extra budget costs (Zeit).

None of this breaks EU law. Article 107 TFEU bans government subsidies that give one country's firms an unfair edge but allows exceptions when support prevents something worse, like factories leaving Europe entirely to escape carbon costs. The Commission approved the German scheme on that basis. The problem isn't legality. It's what happens when the same rulebook meets very different national budgets.

How carbon costs crack the single market

The chain is straightforward. Under the EU's Emissions Trading System (ETS), power plants buy permits to pollute. They pass that cost into electricity prices. Factories that use a lot of power pay more, even if they themselves don't pollute directly. Governments collect billions from auctioning those permits and can channel some of the revenue back to their industries as compensation.

How much they channel back is where the market starts to split. Germany plans to spend €2.9bn on industrial electricity compensation in 2026, about 67% of its projected €4.3bn in ETS auction revenue (Ariadne). France spent 44% of its auction revenue on the same purpose, Belgium 33%, Slovakia roughly 5% (Aktuality). On paper, every government has the same option. In practice, Germany's large manufacturing base generates a bigger auction pot, and its budget gives it room to spend most of it. A country already borrowing heavily to cover day-to-day spending has no spare capacity to match, even if the rules say it can.

The factories that feel the difference

The gap shows up at the plant level. In Romania, Dacia's CEO said the country has Europe's highest industrial energy price and linked the cost uncertainty to a 64% fall in investment and nearly a thousand fewer employees in a single year (Ziarul Financiar). In Poland, all-in energy costs for the largest industrial users reach roughly 170 EUR/MWh, about 45% above the EU average, according to industry estimates warning of annual manufacturing output losses in the billions of zloty (WP).

These numbers carry a caveat. No public dataset shows what a subsidised German glass plant or an uncompensated Polish steelworks actually pays after all national relief, taxes, network charges and hedging contracts are counted. Eurostat publishes non-household electricity prices, but the final bill depends on layers of national support that no single table captures.

The pattern underneath is clear enough. Countries with healthy budgets can absorb more of the carbon-transition cost for their industries. Countries running deep deficits (Romania's reached 9.3% of GDP in 2024, according to HotNews) cannot match Berlin regardless of what the rulebook allows. The Commission hasn't broken the single market. But by approving national aid at this scale without a common floor, it is turning the green transition into a test of government finances rather than industrial efficiency. The smelter in Slovakia got its lifeline. For factories in member states that can't write those cheques, the Commission has yet to offer an alternative.