On 27 June 2012, the European Commission approved a tax relief scheme to the Electricity Authority of Cyprus (EAC) in the form of a free allocation of emission allowances within the meaning of the ETS Directive.



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SA.34250. Allocation of free allowances in the electricity sector under the trading scheme for greenhouse gas emissions after 2012. :

Original publication:

European Commission decision. SA.34250

European Commission. Press release of 27 June 2012.

Inception date: 28 Feb 2013 | Removal date: 28 Feb 2019

Tax or social insurance relief

On 27 June 2012, the European Commission approved a EUR 194 (USD 242.5) million tax relief scheme from Cyprus. The aid will support the Electricity Authority of Cyprus (EAC). The scheme is in force from 28.02.2013 to 28.02.2019.

Under the scheme, the Electricity Authority of Cyprus (EAC) will receive free allocation of emission allowances within the meaning of the ETS Directive. This emission relief corresponds to 10.98 million tons of CO2 and has a total market value estimated to EUR 194 million.

In relation to the beneficiary, the Commission notes that "EAC is a semi-governmental organization and has operated in Cyprus as the sole Electricity Company from 1952 until 2004. Even after 2004, EAC remains the dominant participant with almost 100% market share in conventional generation despite the liberalization of the electricity market in 2004. EAC is the one and only beneficiary of free emission allowances allocated to its eligible installations."

In this context, the European Commission noted that "the measure is selective since it allows only companies active in the electricity generation sector from fossil fuels to benefit. Particularly in Cyprus only one beneficiary meets the conditions set out in the Law that provides for establishing a scheme for greenhouse gas emissions and related issues (Law 110 (I)/2011), and is entitled to it, unlike other undertakings active in the electricity or other economic sectors covered by the ETS. As the beneficiary is active in the supply of electricity, which is a market at least partly open to competition in Cyprus the measure distorts or threatens to distort competition and is liable to affect trade between Member States."

Regardless, the Commission has decided not to raise objections to the aid on the grounds that it "is compatible with the internal market in accordance with Article 107(3)(c) of the TFEU"

The state aid is notified under the following objective: Environmental protection.

A state act in the GTA database is assessed solely in terms of the extent to which its implementation affects foreign commercial interests. On this metric, the financial support granted here is discriminatory.