New guidelines on state aid for climate, environmental protection and energy in the European Union | Jones Day

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On 27 January 2022, the European Commission (“Commission”) adopted the 2022 Guidelines on state aid for climate, environmental protection and energy (“CEAG“). They replace the Guidelines on State aid for environmental protection and energy 2014-2020 (“EEAG“).

The European Green Deal has set ambitious climate and energy targets (including a 55% reduction in greenhouse gas emissions by 2030). The Commission has estimated that these priorities will require €350 million of additional annual investment and will have an impact on all sectors of the economy. This investment challenge will require both private and public financing. As a result, companies will have more opportunities to receive state aid.

The EAEC has defined the conditions which the Commission applies to assess the compatibility of notifiable aid for climate, environmental protection and energy (i.e. aid which requires the prior approval of the Commission ). The General Block Exemption Regulation, or GBER (currently being revised), applies to projects that do not have a notification obligation.

An expanded scope

  • Aid categories: Thirteen categories are covered by the CEEAG, compared to nine in the EEAG. The new categories include (i) aid for the reduction and elimination of greenhouse gas emissions, including through support for renewable energy and energy efficiency (“decarbonisation aid “), (ii) aid for clean mobility, (iii) aid for the efficient use of resources and support for the transition to a circular economy, (iv) aid for the repair of environmental damage, the rehabilitation natural habitats and ecosystems, protection or restoration of biodiversity and implementation of nature-based solutions for climate change adaptation and mitigation, and (v) closure aids power plants using coal, peat or oil shale and mining operations related to the extraction of coal, peat or oil shale. Aid in the form of electricity tax reductions for energy-intensive users is now a separate category, covering more types of tax but fewer sectors. However, if sectoral rules contain provisions relating to environmental protection and energy, these will prevail over the CEEAG. However, certain categories of aid, such as State aid for research, development and innovation (dealt with in the R&D&I framework, currently being revised), or State aid for energy nuclear do not fall within the scope of the CEEAG.
  • Help tools: A wider variety of assistive instruments can be used. These now include decarbonisation aid in the form of contracts for difference, which can lead to a reimbursement by the beneficiary to the State if the reference price (e.g. the market price) exceeds the fixed strike price. in the contract.
  • Cost coverage: As a general rule, the aid will cover 100% of the financing gap (ie the net additional cost compared to the counterfactual scenario where no aid is granted).

Compatibility assessment

The compatibility assessment is a three-step exercise:

  • Step 1: The aid must facilitate the development of an economic activity (positive state). In particular, the aid must have an incentive effect, encouraging the beneficiary to engage in an additional or more environmentally friendly activity than in the counterfactual scenario. In order to increase transparency, public consultation will be required before notification of decarbonisation support measures above certain thresholds, from 1 July 2023 (certain exceptions apply).
  • 2nd step: The aid must not adversely affect trading conditions to an extent contrary to the common interest (negative state). The aid must address residual market failures for which no other policy measure or aid instrument would distort competition less. Its amount must be limited to the minimum necessary. The Commission will carry out a detailed assessment of the net additional cost when the aid is not granted through a tender procedure. The measures are approved for a maximum of 10 years, after which a new notification is necessary to extend the measure.
  • Step 3: The positive effects of aid on competition and trade are weighed against its negative effects (balancing test), applying the “do no significant harm” principle. In view of a gradual exit from fossil fuels, it is unlikely that measures involving support for the latter will be considered compatible. The same applies to new investments in natural gas, unless the Member State establishes that it will contribute to the achievement of the 2030 climate target and the 2050 climate neutrality target.

In addition, the CEEAG sets specific rules for each of the 13 categories of aid.

Aid schemes with a high potential for distortion, large budgets or novel features, as well as
as regimes that must apply in markets where significant technological, regulatory or market changes are expected, may be subject to ex-post evaluation by an independent expert, a shorter deadline and/or in the absence of a call for tenders, individual notification of certain projects may be required.

Member States have until 31 December 2023 to align existing aid schemes with the EAEC, if necessary. To this end, the Commission proposes appropriate measures to the Member States concerned, in accordance with Article 108(1) of the Treaty on the Functioning of the European Union. If they accept these measures within two months of the publication of the EAEC in the Official Journal of the European Union (“OJEU”), a summary notice of the Commission’s decision noting this finding is published in the OJEU, while the full text of the Commission’s decision is available on the Commission’s website. Companies wishing to benefit from existing aid schemes falling within the scope of the CEEAG must closely monitor any changes that may be made to these schemes. More generally, the CEEAG being complex and carrying important evolutions, the companies must take care to anticipate and adapt their future projects and requests for financing in order to be in coherence with the text of the CEEAG. To learn more about the CEEAG, please see our recent Remark.

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