| The compensation regime for indirect carbon costs has received little attention up to now, but this could change as stakeholders ask for an EU-harmonised approach. When designing the EU emissions trading system, protection has been granted to industrial producers to avoid firms relocating where costs from climate regulation are lower, which is known as carbon leakage.
Direct carbon costs, or the actual cost that an industrial firm has to bear to purchase EU allowances for compliance, is partially offset through free allocation. A separate mechanism is in place for indirect carbon costs, or higher power bills resulting from power producers hiking tariffs because of their carbon buying costs.........................................Full Article: Source
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