26 September 2022

State Aid And Sustainability

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In December 2019, the European Commission presented the Green Deal, a roadmap for making the EU's economy sustainable and to transform Europe's economy to carbon-neutral by 2050.
European Union Antitrust/Competition Law
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In December 2019, the European Commission presented the Green Deal, a roadmap for making the EU's economy sustainable and to transform Europe's economy to carbon-neutral by 2050. The competition policy and more particularly the State aid policy has a key role to play in delivering the Green Deal objectives because Europe will need a considerable amount of sustainable investments and Member States will have to make massive investments towards environmental projects.

Such investments may be carried out in a form of state aid, defined as an advantage attributable to a state and financed through state resources, which benefits an undertaking and confers an advantage on a selective basis, distorts or threatens to distort competition and affects trade between EU Member States. State aid is only compatible with the internal market if it is notified and authorised by the European Commission.

New Guidelines on State Aid for Climate Environmental Protection and Energy ("CEEAG") applicable since January 2022

To reach the Green Deal objectives, the European Commission adopted new Guidelines on state aid for CEEAG on 27 January 2022. These Guidelines soften the conditions under which Member States can support sectors that promote environmental protection and the decarbonization of economies ( link here).

A wide range of measures are covered such as clean mobility, resource efficiency, biodiversity, reduction and removal of greenhouse gas emissions including direct support for renewable energy, the production of low-carbon energy (such as hydrogen), and carbon capture.

According to these Guidelines, state aid must genuinely facilitate the development of a specific economic activity ("positive condition") and not adversely affect trading conditions in a way that is contrary to the common European interest ("negative condition).

The negative condition implies that the aid must be necessary (i.e. targeted towards a situation where it can bring about a material development that the market alone cannot deliver), appropriate (i.e. there must not be a less distortive policy and aid instrument capable of achieving the same results), proportional (that is to say the aid amount per beneficiary is limited to the minimum needed for carrying out the aided project or activity) and transparent (among other things, the State must publish the full text of the approved measure).

Future Council Regulation to simplify procedures for State aid to green transport

Recently, a Council Regulation to remove the requirement under EU state aid rules for prior notification in relation to certain types of aid for rail, inland waterway and multimodal transport has been proposed. The objective of this proposal is removal to promote green transport ( link here).

Examples of recent State aid decisions with an environmental impact

In August 2019, the Commission approved a €687 million Finnish scheme and a €27.5 billion German scheme to compensate energy-intensive companies for indirect emission costs. The schemes will cover part of the higher electricity prices arising from the impact of carbon prices on electricity generation costs and aims to reduce the risk of 'carbon leakage', where companies relocate their production to countries outside the EU with less ambitious climate policies, resulting in increased greenhouse gas emissions globally ( link here for the Finnish measure and  here for the German measure).

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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