Zagreb: The European Commission has cleared a €60 million Croatian state aid scheme that compensates energy-intensive companies for the higher electricity prices caused by carbon costs. The decision, reported on 26 October, applies the EU emissions trading system state aid guidelines as amended in December 2025.

The Croatian state aid scheme targets sectors that face international competition and use large amounts of power, including iron and steel, paper and chemicals. These firms pay a share of carbon costs through their electricity bills because power producers pass on the price of emission allowances. Brussels calls these indirect emission costs, and member states may offset part of them to prevent companies from moving production to countries with weaker climate rules.

Croatia can reimburse up to 80 percent of indirect emission costs that eligible firms incur between 2025 and 2030. Payments arrive the year after the costs occur, and the final instalment in 2031 will cover costs from 2030. The amount of aid follows benchmarks linked to electricity consumption efficiency, so the most efficient producers receive the most predictable support.

The Commission attached conditions to the money. A beneficiary must meet at least one of four requirements: carry out certain energy audit recommendations, cover at least 30 percent of its electricity consumption with carbon-free sources, invest at least half of the aid in projects that substantially cut greenhouse gas emissions at its installations, or invest at least half in new or modernised assets that lower the cost of the electricity system.

Those conditions reflect a shift in how Brussels handles carbon leakage aid. The amended guidelines tie money to decarbonisation effort. A firm that wants support under the Croatian state aid scheme must show progress on efficiency, clean power or investment, which gives the aid a climate purpose alongside its competitiveness aim.

The decision carries the case number SA.123819. The Commission will publish a non-confidential version in its state aid register once confidentiality issues are resolved, at which point lawyers and competitors can read the exact eligibility criteria and calculation formulas.

The approval of the Croatian state aid scheme sits within a wider pattern of national support for heavy industry. Governments across the Union are under pressure to protect steel, chemicals and paper producers from high energy prices, while the Commission has to make sure that subsidies do not distort the single market. Competition officials examine whether aid is necessary, proportionate and limited in time, and the 2030 end date and 80 percent cap are the kind of safeguards that help the Croatian state aid scheme pass that test.

Industrial groups in other member states will study the Croatian state aid scheme closely. If it works smoothly, similar compensation schemes could follow, each tied to efficiency or investment conditions of its own. For Zagreb, the immediate task is to open applications and show that the Croatian state aid scheme delivers cleaner production, not just lower bills.