Germany Wins €2.9bn Industry Aid

At Slovalco, Slovakia's only aluminium smelter, the government has promised almost €470m up to 2030 to help cover electricity costs and keep the furnaces on (Denník E). Bratislava sold it as an exceptional rescue for a strategic plant. Then Berlin secured approval for a scheme on a different scale.

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

This is not illegal state aid. Article 107 TFEU generally blocks government subsidies that give one country's firms an unfair advantage, but it also allows exceptions when aid prevents a worse outcome, such as factories leaving Europe to escape carbon costs. The Commission used that logic to approve the German scheme. The difficulty is not the letter of the law. It is what happens when the same EU rulebook is applied to countries with very different public finances.

How carbon costs crack the single market

The mechanism is simple enough. Under the EU's Emissions Trading System, power plants buy permits for the carbon they emit. They pass that cost into electricity prices. Factories that consume large amounts of power pay more, even when their own production process is not the direct source of emissions. Governments then collect billions from auctioning those permits and are allowed to return part of that money to industry as compensation.

The split begins with how much they return. 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%, and Slovakia roughly 5% (Aktuality).

Formally, every government has access to the same instrument. In practice, Germany's industrial base generates a larger auction pot, and its budget gives Berlin room to spend much of it. A government already borrowing heavily to pay for ordinary spending cannot match that response, even if Brussels says the option is available. Malta knows this problem in another form: EU rules may be common, but the capacity to use them is never evenly shared between a large industrial state and a small economy trying to protect its margins.

The factories that feel the difference

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

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

The direction of travel is still clear. Countries with stronger budgets can absorb more of the carbon-transition cost for their industries. Countries with deep deficits cannot. Romania's deficit reached 9.3% of GDP in 2024, according to HotNews, leaving it with little room to compete with Berlin's chequebook.

The Commission has not torn up the single market. But by approving national aid at this scale without a common floor, it is allowing the green transition to become a test of fiscal strength rather than industrial efficiency. Slovakia's smelter got its lifeline. For factories in member states that cannot write those cheques, Brussels has still not offered an answer.