The FT reports today that the German government is acting to blunt the effects of the ETS (the European cap and trade program):

Berlin is preparing to help domestic industries overcome the economic crisis by cutting the electricity bills of the country’s largest energy users.

Aluminium, copper and zinc producers are among energy-intensive industrial sectors that could benefit from the plans, which are set to be agreed ahead of elections in September.

Ministers have argued for months about how best to aid domestic industries and the chancellery has also intervened in the discussions, industry sources have told the Financial Times.

Any subsidies will be examined closely by competition authorities in Brussels and could prompt renewed criticism that Berlin is undermining European Union climate legislation. . . .

The bulk of any relief is likely to be found by reimbursing companies for the cost of carbon dioxide emissions trading certificates that utilities currently price into their electricity bills.

Berlin successfully argued at an EU summit in December that energy-intensive industries should be not be forced to buy emission permits between 2013 and 2020 because companies would shift production overseas. It now wants to go further by compensating energy-intensive companies in the intervening years. Officials are also considering whether to reward big power consumers for their role in balancing the electricity network during peak-load periods.

But Claudia Kemfert, head of energy policy at the German Institute of Economic Research (DIW Berlin), said it was “not the government’s job to subsidise the profits of energy companies”.