Brussels Lets Zagreb Write a €60 Million Cheque to Keep Heavy Industry from Packing Its Bags

The European Commission has cleared a €60 million Croatian support package designed to soften the blow of power bills for heavy industry. Under EU state aid rules—the single market's rulebook designed to stop national governments from bankrolling local champions at their neighbours' expense—Zagreb has been granted permission to partially reimburse energy-intensive manufacturers for the rising cost of electricity driven by the EU Emissions Trading System (ETS). The subsidies target what the Berlaymont terms 'indirect emission costs': the extra charge that power companies pass on to factories because electricity generators must buy permits to pollute. By picking up part of that bill, Croatia hopes to stop domestic manufacturers from packing up and moving their furnaces to countries with looser environmental standards and cheaper power.

For decades, European climate policy has walked a tightrope between penalising fossil fuels and driving away the companies that use them. When an industrial plant shuts down in Europe and reopens in a jurisdiction with no carbon price, the climate gains nothing and the local economy loses factory jobs—a phenomenon known inside the bubble as 'carbon leakage'. For Croatian businesses operating foundries, chemical lines, or paper mills, electricity is not merely an overhead cost; it is often their largest expense. The €60 million injection offers immediate financial breathing room, ensuring that the cost of European climate ambition does not push domestic heavy industry out of the single market altogether.

State aid clearance is one of the few areas where the Commission acts not as a policy convenor, but as an antitrust referee with absolute power to veto national spending. Normally, handing millions in state cash to selected factories is the quickest route to an infringement procedure. However, the EU’s ETS state aid guidelines allow for a specific carve-out: member states may step in to cover indirect carbon costs, provided the compensation does not distort fair competition across the internal market. The institutional irony is classic Brussels: having created a carbon market specifically designed to make fossil-fuelled electricity expensive, the Commission must routinely inspect and approve national schemes designed to make it affordable again for the industries most affected.

With the Commission's green light secured, the Croatian government can proceed to roll out the scheme to eligible industrial beneficiaries. Croatian authorities will oversee the disbursement of the €60 million fund, while the Commission retains oversight to ensure the compensation stays strictly within the boundaries of approved state aid ceilings and EU carbon-leakage guidelines.