Slovenia notified State Aid for indirect ETS costs

Tanja Fajon Podpredsednica Vlade in Ministrica za zunanje in evropske zadeve Prešernova cesta 25 SI -1001 Ljubljana SLOVENIJA EUROPEAN COMMISSION Brussels, 27.2.2026 C(2026) 1444 final PUBLIC VERSION This documen t is made available for information purp oses only. Subject: State Aid SA.120932 (2025/N) – Slovenia Compensation for indirect ETS costs in Slovenia for 2025 - 2027 Excellency, 1. P ROCEDURE (1) By electronic notifica tion dated 11 November 2025, Slovenia notified to the European Commission (the “Commission”), in a ccordance with Article 108(3) of the Treaty on the Functioning of the European Union (“TFEU”), a sche me to compensate undertakings for a share of their indirect emission costs, that is to say the costs r esulting from the EU Emission Trading System (“ETS”) passed on in electricity prices (“the measure”). (2) By letter dated 3 November 2025, Slovenia exceptionally agreed to waive its rights deriving from Article 342 TFEU, in conjunction with Article 3 of Regulation 1/1958 (1) and to have this Decision adopted and notified in English. (1) Regulation No 1 determining the lang uages to be used by th e European Economic Comm unity, OJ 17, 6.10.1958, p. 385.

2 2. D ETAILED DESCRIPTION OF THE MEASURE (3) The measure comp ensates certain undertakings for increases in electricity prices resulting from the pass-through of the greenhouse gas emissions costs due to the EU ETS, so-called ‘ indirect emission costs ’, as defined in the Guidelines on certain State aid me asures in the context of the greenhouse gas emissi on allowance trading scheme post-2021 (2) (“the ETS Guidelines post - 2021”). (4) From 2022 to 2024, a preceding measure with the same objective was in place, which the Commission approved on 15 February 2023 (3). 2.1. Legal basis, dura tion, budget, finan cing and gran ting authority (5) The legal basis for the measure is: (a) Article 31 of the Slovenian Climate Law (4); and (b) draft decree on compensation for th e coverage o f indirect costs incur red from gr eenhouse gas em ission costs for the benefit of certain sectors and subsectors at risk of carbon leakage for the period from 2025 to 2027. (6) The Slovenian authorities c onfirmed that the dra ft decree enabling the granting of aid would only be adopted a fter the notification of the Commission’s decision approving the measure. (7) The measure covers indirect emission costs incurred in years 2025 to 2027. (8) The aid, in the for m of a direct grant, will be paid to the be neficiary, upon request, in year t + 1 for costs incurred in year t. Th e first payments will be made in 2026 on the basis of th e eligibl e costs for year 2025 and last payments in 2028 for costs incurred in 2027. (9) The mea sure will be financed through the Climate F und spending programme for the period 2025-2028 currently in force (4. M easures in the e conomy, 4.1 Coverage of indirect costs due to the cost of greenhouse gas emissions). The Climate Fund is establish ed within the framework of the State budget. The source of financing of the Clim ate Fund are revenues ge nerated from the auctioning of the EU ETS allowances. The overall annua l aid amount for all beneficiaries cannot e xceed 20 % of Slovenia’s annual revenue from the sa le of EU ETS allowances. (10) The estimated total budget of the scheme is approximately EUR 78 million for the period 2025-2027, and the estimated annual budget is EUR 26 million annually. (2) Co mmun ication from the Commission — Gu idelines on certain State aid measur es in the context of the sy stem f or g reenhouse gas emission allowance tr ading po st -2021 (OJ C 317, 25.9.2020, p. 5), as supplem ented by the Communication from the Commission s upplemen ting th e Guidelines on certain State aid measur es in the con text of the system for g reenhouse gas emission allowan ce trading post-2021 (OJ C, C/52 8, 30.12.2021, p. 1), as amended by the Communication from the Commission amending the Guidelines on ce rtain State aid measures in the context of the system f or greenhouse g as emission allowance trading post -2021 (OJ C, C/2026/1 96, 5.1.2026, ELI: http://data.euro pa.eu/eli/C/2026/196/oj). (3) Commission Decision C(2023) 1123 FINAL of 15 February 2023 in State aid ca se SA.6 3525 (2023/N) – Slovenia - Compensation for indirect ETS costs in Sloven ia for 2022 - 2024 (OJ C 131, 14.4.2023, p. 11). (4) https://pisrs.si/preg ledPredpisa?id=ZAKO889 9.

3 (11) The Mini stry of the Environment, Climate and Energy (the “Ministry”) w ill be the competent authority to grant the aid on the basis of an application from a n eligible undertaking. 2.2. Beneficiaries (12) The beneficiaries are und ertakings active in one of the sectors or sub -sectors listed in Annex I, Table 1 to the ETS Guidelines post-2021. They will be eligible under the measure for costs incurred as from 1 January 2025. (13) The Slovenian authorities explained that the choice of sectors was made on the basis of objective, non-discriminatory and transparent criteria, namely requiring an indirect emission intensity of 1 kg CO 2 /EUR to be considered eligible. (14) The aid is granted in tw o steps. First, upon application, the Ministry iss ues a decision on the eligibility for c ompensation to the bene ficiary for the period until 31 December 2027. Second, upon application submitted by an eligible beneficiary between 31 March and 30 April each year, the Ministry issues a decision on the amount of compensation for the previous calendar year. (15) No aid will be granted under the measure to in particular: (a) undertakings in difficulty as de fined by the Gui delines on State aid for rescuing and restructuring firms in difficulty (5); (b) undertakings subject to a pending recovery ord er following a p revious decision of the European Commiss ion declaring aid unlawful and incompatible with the common market; (c) undertakings that are recipient of overpaid aid under C ommission Regulation (EU) 2023/2831 on de minimis aid (6); (d) undertakings that have unpaid tax liabilities or other financial non -tax liabilities in a ccordance with the Act gove rning financial administration (7), exceeding EUR 50. (16) Certain beneficiaries must carr y out an energy audit measure pursuant to Article 11 of Directive (E U) 20 23/1791 (8). This can be done either as a st and-alone energy audit or within the framework o f a certifie d Energy Management S ystem or Environmental Management System, for example the EU eco -management and audit scheme (“ EMAS ”). The concerned beneficiaries will be required to submit a valid energy audit report (not older than 4 years) i n their annual application. The Slovenian authorities w ill check compliance with this obligation before the granting of the aid. (17) Based on Article 6 of the draft decree, all beneficiaries, regardless of their size, must provide evidence in their application that they covered at least 30 % of the (5) Guidelines on State aid for rescuing and restructurin g n on -financial undertak ings in d ifficulty (OJ C 249, 31.07.2014, p.1), as amended or r eplaced. (6) Commission Regulatio n (EU) 2023/2831 o f 1 3 December 2023 on the application of Articles 107 and 108 of the Tr eaty on the Functionin g of the European Union to de minimis aid (OJ L, 2023/2 831, 15.12.2023, ELI: http://data.euro pa.eu/eli/reg/2023/2831/o j). . (7) Official Gazette of the Republic of Sloven ia, No. 25/14 in 39/22. (8) Directive (EU) 2023/1791 of the E uropean Parliament and of the Council of 13 Septem ber 2023 on energy efficiency an d amending Regulation (EU) 2023 /955 (recast) (OJ L 231, 20.9.2023, p. 1). This Direc tive r epealed with effect from 12 October 2025 Directive 2012/27/EU of the Euro pean Parliament and of the C ouncil of 25 Octo ber 2012 on energy efficiency, am ending Directives 2009/125/EC and 2 010/30/EU an d rep ealing Dir ectives 20 04/8/EC and 2006/32 /EC (OJ L 315, 14.11.2012, p. 1).

4 electricity consumption on the eligible installation fr om low-carbon sources (9) in the year f or which the aid is granted (yea r t). The Slovenian authorities explained that benefic iaries may c omply with this obligation through on-site or near-site energy generation facilities, power purcha se agreements and gua rantees of or igin for low- carbon sourc es. The Ministry will ve rify that the beneficiaries comply with that obligation on an annual basis before the granting of the aid. No aid will be granted in case of non-compliance. (18) Additionally, in ac cord ance with Articl e 6(2) of the draft decree, a ll beneficiaries must use the compensation received during the enti re support period for projects of energy production from renewable sour ces in Slovenia, for en ergy efficiency of the production of eligible products or for investments to re duce gre enhou se gas emissions from the production of eligible products, within two years of receiving the last aid payment at the latest. In case of non -compliance, the concerned beneficiary must reimburse the proportion of the aid already received that has not been spent in accordance with the require ments under Articles 6. (19) The expected number of beneficiaries is between 11 and 50. 2.3. Aid amount calculation (20) The maximum a id amoun t payable pe r installation will be calculated according to the two formulas outlined in point 28 of the ETS Guidelines post-2021. (21) Where electricity consumption efficiency benchmarks li sted in Annex II to the ETS Guidelines post-2021 are applicable to the produc ts manufactured by the beneficiary, the formula of point 28(a) of the ETS Guidelines post -2021 ap plies. Where those electricity consumption efficiency be nchmarks are not applicable, the formula of point 28(b) of the ETS Guidelines post-2021 applies. (22) The Slovenian a uthorit ies confirmed that the measure adopts the definitions of point 15 of the ETS Guidelines post-2021 for all the elements of the formulas. The draft decree provides for electricity consumption efficiency benchmarks and a regional CO2 emission factor, in line with Annexes II a nd III to the ETS Guidelines post-2021. The Slovenian authorities also confirmed that the maximum regional CO 2 emission factor of 0.69 applies for indirect emissi on costs incurred in the year 2025, while the CO 2 emission fa ctor of 0.75 a pplies for indirect emission costs incurred as from 1 Ja nuary 2026, in line with the ETS Guidelines post-2021, as amended. The Slovenian authorities further confirmed that any future electricity consumpti on efficiency benchmarks adopted by the Commission would be included in an amended decree to supplement or replace existing benchmarks. (23) For the purpose of calculating the aid under the fo rmula set out in point 28(b) of the ETS Guidelines pos t-2021, a f all-back electricity consumpti on efficiency benchmark of the baseline electricity consumption will be used, as envisaged by Annex II to the ETS Guidelines post-2021. (24) The Slovenian authoritie s confir med that if an inst allation manufa ctur es products for which an electricity consumption efficiency benchmark listed in Annex II to the ETS Guidelines post-2021 is applicable and products for which the fall -back electricity consumption efficiency benchmark is applicable, the electricity consumption for each product is apportioned according to the respective tonnage (9) The Slovenian authorities explain that this means electricity from renewable energy sources or electricity from nuclear processes.

5 of production of each pr oduct. If an installation manufactures products that are eligible for aid and products that are not e ligible for aid, the maximum aid payable is calculated only for the products that are eligible for aid. (25) The maximum aid intensity will be 75 % of the indirect emissi on costs incurred. If the total amount of compensation reque sted by the eligible beneficiaries exceeds the available annual budget of the measure, the individual compensation amounts will be reduced proportionally for all b eneficiaries d epending on the available budget. The aid intensity will be the same for all eligible beneficiaries. 2.4. Cumulation (26) The Slovenian authorities confirmed that the scheme will comply with points 33 to 35 of the ETS Guidelines post-2021, so that the aid may be cumulated with: (a) any other State aid in relation to differe nt identifiable eligible costs; (b) any other State aid, in r elation to the same eligible costs, partly o r fully overlapping, and any other State aid without identifiable eligible costs, only if such cumulation does not result in exceeding the maximum aid intensity or aid amount applicable to the aid under the measure. (27) Union funding centrally managed by the Commission that is not directly or indirectly under the control of the Member State, does not constitute State aid. Where such Union funding is combined with State aid, only the latter is considered for determining whether notification thresholds and maximum aid intensities a re re spe cted, provide d that the total am ount of publi c fu nding granted in relation to the same eligible costs does not exceed the maximum funding rate(s) laid down in the applicable rules of Union law. (28) Aid must not be cumulated with de minimis aid in respect of the same eligible costs if suc h cumulation would result in an aid intensity e xceeding that laid down under the measure. 2.5. Transparency, monitoring and reporting (29) The Slovenian authorities undertake to comply with and apply the tr ansparency, reporting, and monitoring requirements set out in points 56 to 62 of the ETS Guidelines post -2021. T he information listed in point 56 of the ETS Guidelines post-2021 will be published on https://www.gov.si/teme/trgovanje-s-pravicami- do-emisije/. 3. A SSESSMENT OF THE MEASURE 3.1. Existence of aid within the meaning of Article 107(1) TFEU (30) In order for a measure to constitute State aid within the mea ning of Article 107(1) TFEU it has to fulfil four conditions. First, the aid must be imputable to the State and involve State resources. Second, the measure must confer a s elective advantage to certain undertakings or the production of certain goods. Third, the measure must be liable to affe ct trade between Member States. Fourth, the measure must distort or threaten to distort competition in the internal market. (31) The compensation is granted by the ministry responsible for the environment (see recital (9)), based on the law (Environm ental Pro tection Act) and a draft decree (see recital (5)). The me asure is funded through S lovenia’s EU ETS allowances auctioning revenue s through the Climate Fund that is established within the

6 framework of the State budget in a ccordance with the law (see recital (9)). Hence, the measure is imputable to the State and finan ced through State resources. It confers an advantage to the beneficiaries by compensating for costs they would have borne under norm al market conditions. The aid is selective since it is granted only to the undertakings active in certain sectors (see recital (12)). Those sectors are all exposed to international competition a s noted in point 20 of th e ETS Guidelines post-2021, making it liable to affect trade between M ember States and distort competition. (32) Based on the above, the Commission considers that the measure constitutes State aid within the meaning of Article 107(1) TF EU. 3.2. Lawfulness of the aid (33) The legal basis of the measure is still a draft and w ill be adopted and subsequently enter into force only after the notification of the Co mmission’s decision approving the measure (see recital (6)). (34) By notifying the measure before its implementation, the Slovenian authorities have fulfilled their obligations under Article 108(3) TFEU. 3.3. Compatibility 3.3.1. Legal basis for the assessment of the compatibility of the aid (35) The Commiss ion has assessed if the measure can be considered compatible with the internal market pursuant to Article 107(3)(c) TFEU. (36) Aid aimed at compensating for ETS allowance costs passed on in electricity prices incurred by undertakings from sectors or subsect ors deemed to be exposed to a significant risk of carbon leakage falls within the scope o f the ETS Guidelines post-2021. The C ommission assessed the measure’s compatibility on the basis of section 3.1 of the ETS Guidelines post-2021, which sets out the conditions unde r which such aid may be deemed c ompatible. 3.3.2. The aid facilitates the development of an economic activity 3.3.2.1. Contribution to the development of a n economic a ctivity (37) According to Article 107(3)(c) TFEU, the Commission may consider to be compatible with the internal market a id to facilitate the development of an economic activity, where such aid does not adversely af fect trading conditions to an extent contrary to the common interest. (38) The mea sure supports companies active in one of the sectors or sub-sectors listed in Table 1 of Annex I to the Guidelines post-2021 (see r ecital (12)), which correspond to sectors and sub-sectors deemed to be exposed to a genuine risk of carbon leakage due to indirect emission costs. (39) Therefore, the Comm ission conside rs that the measure contributes to the development of certain economic activities, namely sectors deemed to be exposed to a genuine risk of carbon leakage due to indirect emission costs. 3.3.2.2. I n centive effect (40) State aid ha s an ince nti ve e ffect if it incentivises the bene ficiary to change its behaviour towards the de velopment of a c ertain e conomic ac tivity pursue d by the aid and if the change in behaviour would not occur without the aid.

7 (41) According to point 25 of the ETS Guid elines pos t -2021, for the aid to have an incentive effect and actually prevent carbon leakage, it must be applied for and paid to the benefic i ary in the year in whic h the costs are incurred or in the following year. (42) The measure for esees that the aid will be paid t o the beneficiary in the year following the one in which the costs were incu rred (year t + 1) (see recital (8)). The mea sure therefore co mplies with points 25 of t he ETS Guidelines post-2021. (43) The Commission therefore conc ludes that the aid has an incentive effect. 3.3.2.3. Compliance with other relevant provisions of EU law (44) State aid that contravenes provisions or ge neral principles of EU law cann ot be declared compatible. (45) Beneficiaries will be held to comply with their obligations unde r Article 11 of Directive (EU) 2023/1791) on energy efficiency (see recital (16)). (46) Therefore, the C ommission considers th at the measure does not inf ringe other relevant provisions of EU law. 3.3.3. The aid does not unduly affect trading conditions to an extent contrary to the common interest 3.3.3.1. Positive eff ects of the aid (47) The measure will contribute to the development of sectors exposed to a genuine risk of carbon leakage due to indirect emission costs (see recital (39)). (48) Addressing the risk of car bon leakage serves an environmental objective sin ce the aid aims to avoid an increase in global greenhouse gas emissions due to sh ifts of production outside the Union, in the absence of a binding int ernational agreement on reduction of greenhouse gas emissions, as explained in point 20 of the ETS Guidelines post-2021. 3.3.3.2. Ne ed for State intervention (49) Point 20 of the ETS Guidelines post-2021 requires that the objective of the aid is to prevent a significant risk of carbon leakage due to EU ETS allowance c osts passed on in electricity prices and incurred by the beneficiary, if its competitors from third countries do not face sim ilar CO 2 costs in their electricity prices and the beneficiary is unable to pass on those costs to product prices without losing significant market share. (50) According to point 21 of the ETS Guide li nes post -2021, for the purposes of those guidelines, a significant risk of carbon leak age is conside red to exist if the beneficiary is active in a sector or subsector listed in Annex I. The beneficiaries of the measure are undertakings active in one of t he sectors o r sub -sectors listed in Annex I to the ETS Guidelines post-2021 (see recital (12)). (51) According to point 22 of the ETS Guidelines post-2021, if Member States decide to gra nt the aid only to so me of the sectors listed in Annex I, the choice of sectors must be made on the basis of objective, non-discriminatory and transp arent criteria. Slovenia decided not to apply the measure to sectors listed in Annex I, Table 2, by considering an indirect emission intensity threshold of 1 kg CO2/EUR as the minimum threshold for eligibility. The Commission considers that this is

8 approach is bas ed on obje ctive, non-discriminatory and transparent criteria, in line with point 22 of the ETS Guidelines post-2021. (52) T he Commiss ion concludes that the aid is necessary to realise the measure’s objective of avoiding a genuine carbon leakage risk for the eligible sectors, avoiding an increase in global greenhouse gas emissions. 3.3.3.3. Appr opriateness of the aid (53) According to point 24 of the ETS Guidelines post-2021, for the purp ose of compensating indirect ETS costs, State aid is considered an appro priate instrument independently of the form in which it is granted. The guidelines consider compensation ta king the form of a direct g rant an appropriate instrument. (54) The support will be given as a direct grant (se e recital (8)). Therefore, the Commission considers the chosen type of aid appropriate to address the r isk of carbon leakage. 3.3.3.4. Proportionality of the a id (55) According to point 27 of the ETS Guidelines post-2021, the aid is proportionate and has a sufficiently limited negative effect on competition and trade if it does not exceed 80 % of the i ndirect emission costs incurre d fo r the sectors listed in Table 1 of Annex I. The electricity consumption eff iciency be nchmark e nsures that support to inefficient production processes remains limited and maintains the incentive for dissemination of the most energy-efficient technologies. (56) The maximum aid intensity being 75%, it will not exceed 80 % for the eligibl e sectors (see re cital (25)), in compliance with point 27 of the ETS Guidelines post- 2021. (57) The formulas for the calculation of maximum aid payable under the measure are in line with point 28 of the ETS Guidelines post-2021 (see recital (20)). (58) The measure adopts the definitions of point 15 of the ETS Guidelines post-2021, for all the elements of the formulas. The measure also a pplies the electricity consumption efficiency benchmarks d efined in Annex II of the ETS Guidelines post-2021, as well as the maximum regional emission factor of Annex III of the ETS Guidelines post-2021 (see r ecital (22)). The Commission takes note of the commitment by Slovenia to use ef ficiency benc hmarks where updated by the Commission (see recital (22)). (59) The measure also complies with point s 29 and 30 of the ETS Guidelines post- 2021 for the following rea sons. The Slovenian authorities explained that if an installation manufactures products for which a product-specific el ectricity consumption efficiency benchmark is applicable and products for which the fall- back electricity consumption efficiency benchmark is applicable, the electricity consumption for e ach product must be apportioned according to the respective tonnage of production of each product. If an installation manufacture s products that are eligible for aid a nd products that are not eligible for a id, the maximu m aid payable shall be calculated only for the products that are eligible for aid (see recital (24)). (60) According to point 23 of the ETS Guide li nes post-2021, within the eligible sector, Member States need to e nsure that the choice of benefic ia ries is made on the basis of objective, non-discriminatory and transparent criteria and that the aid is granted in principle in the same way for all competitors in the same sector if they a re in a

9 similar factual sit uation. The eligibili ty conditions and the procedure laid down in the measure referred to in recitals (12) to (18) comply with those requirements. Moreover, the aid int ensity remains the same for all beneficiaries in a given year (see recital (25)). (61) The duration of the measure does not exceed the duration of the ETS Guidelines post-2021 (see recital (7)). Therefore, the measure complies with point 36 of the ETS Guidelines post-2021. 3.3.3.5. Cumulation (62) Slovenia committed to respect the rules on cumulation in line with the requirements set out in point s 33 to 35 of the E TS Guidelines post -2021 (see recitals (26) to (28)). 3.3.3.6. Ene rgy audits and management systems (63) According to point 54 of the ETS Guidelines post-2021, Member States must commit to verifying that the beneficiary complies with its obligation to conduct an ene rgy audit, either as a stand -alone ene rgy a udit or within the framework of a certified Energy Manage ment System or Environmental Management System, for example the EU eco-management and audit scheme (EMAS). (64) The measure foresees that beneficiaries falling under the obligation to carry out an energy audit in the meaning of Article 11 of Directive (EU) 2023/1791 must comply with it, either as an independent energy audit or as part of a certified energy management syst em or certified environmental management syst em (see recital (16)). The compliance with this obligation is checked before the granting of the aid. The measure therefore complies with point 54 of the ETS Guidelines post-2021 (10). (65) According to point 55 of the ETS Guidelines post -2021, Member S tates must also commit to monitoring that these beneficiaries will: (a) implement recommendations of the audit report, to the extent that the pay - back time for the r elevant investments does not exceed 3 years or the p ay- back time referred t o in Article 10a(1), 3rd subparagraph of Directive 2003/87/EC, whichever is longer, and that the costs of their investments is proportionate; or alternatively (b) reduce the carbon footprint of their electricity consumption, so as to cover at least 30% of their electricity consumption from carbon-free sources; or alternatively (c) invest a significant share of at least 50 % of th e aid amount in projects that lead to substantial re ducti ons of the installation’s gre enhouse gas emissions and well below the applicable benchmark us ed fo r fr ee allocation in the EU Emissions Trading System, or alternatively (d) invest at least 50 % of the aid amount in new or modernised assets that can be measurably shown to make an additional contribution to re ducing the costs of the electricity sy stem, reflecting market and system needs in that Member State, without resulting i n an increase of fossil fuel consumption. Eligible investment activities can include, for e xample, the development of (10) The Commission notes that Dir ective (EU) 2023/1791 repealed Directiv e 2 012/27/EU and, in line with Ar ticle 38, second subparag raph of Direc tive (EU) 202 3/1791, ref erences to the repealed Directive shall b e construed as refer ences to Directive (EU) 2023/1791.

10 renewable energy ge neration c apacities, energy storage solutions, mea sure s to increase demand-side flexibility, energy efficiency improvements that impact electricity de mand, and the development of electrolysers for the production of renewable or low -carbon hyd rogen. Investments aimed at electrification are also eligibl e. Member States may establish a more li mited list of eligibl e investments, but investments to increase demand -side flexibility must be eligible. (66) Under the measure, all beneficiaries, regardless of their size, must provide evidence in their application that they covered at least 30 % of the electricity consumption on the eligible installation from low-carbon sou rces in the ye ar for which the aid is granted (year t) (see recital (17)). The S lovenian authorities will verify that beneficiaries c omply with those obligations before the granting of the aid. (67) The Comm ission considers that a reasonable pe riod of time, as referred to in recital (68), for implementing one of these obliga tions is in line with point 55 of the ETS Guidelines post-2021. (68) The Commission notes that, in addition, as a national requirement, all beneficiaries must use the compensation received during the entire support period for projects of energy production from renewable s ources in Slovenia, fo r e nergy efficiency of the production of eligible products or for investments to reduce greenhouse gas emissions from the production of eligible products, within two years of re c eiving the last compensation at the latest (see recital (18)). The Slovenian authorities w ill monitor compliance with that requirement. This additional obligation is based on objective, non -discriminatory and trans parent criteria and therefore complies with point 23 of the ETS Guidelines post-2021. 3.3.3.7. Tra nspar ency, reporting and monitoring (69) The Slovenian authorities committed to comply with the requirements set out in points 56 to 62 of the ETS Guidelines post -2021 on transparency, reporting and monitoring of the measure (see recital (29)). 3.3.3.8. F irms in difficulty or subject to an outstanding recovery order (70) According to point 10 of the ETS Guidelines post-2021, aid may not be awarded to firms in difficulty within the meaning of the Guidelines on State aid for rescuing and restructuring firms in difficulty. Moreover, according to point 11 of the ETS Guidelines post-2021, when assessing ai d in favour of an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring aid to be illegal and incompatible with the internal market, the Commission will take account of the amount of aid still to be recovered. In pr actice, it will assess the cumulative effect of both aid measures and may suspend the pay ment of the ne w aid until the outstanding recovery order is implemented. (71) Under the measure, no aid will be granted to (i) undertakings in difficulty withi n the meaning of the Commission guidelines on S tate aid for rescuing and restructuring firms in dif ficulty a nd (ii) undertakings subject to an outstanding recovery order following a previous C ommission decision declaring aid to be unlawful and incompatible with the internal market (see recita l (15)). (72) Therefore, the measure complies with point s 10 and 11 of the ETS Guidelines post-2021.

11 3.3.3.9. Remaining distortions of trading conditions (73) Compensation for indirect ETS costs risks distorting competition between companies within the same sector active in different EU Member States (intra - sector competition). This is be cause only some countries may put a compensation scheme in place for the fourth EU ETS trading period from 2021 to 2030. (74) Additionally, the measure may create a limited risk of competition distortions to the extent that products of certain eligible sectors may c ompete with products manufactured in sectors that are not eligible for indirect cost comp ensation (inter - sector competition). (75) Those risks are however mi tigated by the f act that the measure complies wi th all the conditions laid down in both ETS Guidelines post -2021, which set a l ist of eligible sectors, a maximum aid intensity, a id calculation for mul as and electricity consumption efficiency benchmarks at Union level. Moreover, under the measure, the sam e aid intensity will be applied to all beneficiaries depending on the available budget (see recital (25)). 3.3.3.10. Conclusion on distortion of competition and balancing test (76) As explained above, the measure will facilitate the development of sectors exposed to a significant risk of carbon leakage due to indirect emission costs and will contribute to avoiding an increase in global greenhouse gas emissions (see recitals (37) to (48)). (77) Moreover, the necessity, appropriateness and p roportionality of the aid limit its impact on competition and tra de. The Commission concludes that even if an impact on intra-sector and inter-sector competition cannot be exc luded, it appears that the negative effects of the aid are sufficiently limited for the overall balance of the measure to be positive. 4. C ONCLUSION The Commission has acc ordingly dec ided not to raise objections to the aid on the grounds that it is compatible with the internal market pursuant to Ar ti cle 107(3)(c) of the Treaty on the Functioning of the European Union. Yours faithfully, For the Commission Teresa RIBERA Executive Vice-President