Part 2: Subsidy control requirements Chapter 1: Principles Schedule 2: The energy and environment principles
This schedule sets out the additional principles that must, where relevant, be considered for subsidies in relation to energy and the environment. These are derived from the UK’s international obligations, specifically under Annex 27 of the TCA.
	The effect of each principle is:
Principle A: energy and environment subsidies shall be aimed at and shall incentivise the beneficiary in either delivering a secure, affordable and sustainable energy system and a well-functioning and competitive energy market, or increasing the level of environmental protection compared to the level that would be achieved in the absence of the subsidy.
Principle B: energy and environment subsidies shall not relieve the beneficiary from liabilities arising from its responsibilities as a polluter under the law of any of the nations of the UK.
Principle C: Subsidies for electricity generation adequacy, renewable energy or cogeneration shall not undermine the ability of the UK to meet the specified obligations under the TCA, and shall be determined by means of a transparent, non-discriminatory and effective competitive process. A non-competitive process may, however, be used to determine a subsidy for renewable energy or cogeneration if appropriate measures are put in place to prevent overcompensation and the market supply (i.e. the number of potential subsidy beneficiaries) is insufficient to ensure a competitive process, the eligible capacity is unlikely to have a material effect on any competition or investment within the UK, trade between the UK and any country or territory outside the UK, and investment as between the UK and any country or territory outside the UK, or if the subsidy is given for a demonstration project.
Principle D: Subsidies for electricity generation adequacy may be limited to installations not exceeding specified CO2 emission limits.
Principle E: Subsidies for renewable energy or cogeneration shall not affect beneficiaries’ obligations or opportunities to participate in electricity markets.
Principle F: Subsidies in the form of partial exemptions from energy-related taxes and levies in favour of energy-intensive users shall not exceed the total amount of the tax or levy concerned.
Principle G: Subsidies in the form of compensation for electricity-intensive users given in the event of an increase in electricity costs resulting from climate policy instruments shall be restricted to sectors at significant risk of carbon leakage due to the cost increase.
Principle H: Subsidies for the decarbonisation of emissions linked to industrial activities in the UK shall achieve an overall reduction in greenhouse gas emissions, and reduce the emissions directly resulting from the industrial activities.
Principle I: Subsidies for improvements of the energy efficiency of industrial activities in the UK shall improve energy efficiency by reducing energy consumption, either directly or per unit of production.