The European Commission has endorsed its new Climate, Energy and Environmental Aid Guidelines 2022

The European Commission’s revised Guidelines on state aid for climate, environmental protection and energy (« CEEAG ») have been endorsed on 27 January 2022.

The CEEAG replace the Guidelines on State aid for environmental protection and energy 2014-2020 which had been extended by one year in 2020. Member states will therefore have to adapt their existing aid schemes approved under the previous Guidelines by 31 December 2023.

The CEEAG provide guidance on how the Commission will assess the compatibility of aid measures subject to the notification requirement under Article 107(3)(c) TFEU. Thus, their purpose is to provide the conditions that an individual aid or an aid scheme must fulfill in order to be authorized in the context of a notification.

They apply when the proposed aid cannot be covered on the basis of the General Block Exemption Regulation (“GBER”) (which is also being revised and is expected to be adopted in the first half of 2022) that allows Member States to create aid scheme or grant individual aid without prior notification to the Commission. The CEEAG thus concern large amounts of aid or new categories of aid that are not yet included in the GBER.

As announced in our previous article, the Commission launched a public consultation in June 2021 inviting interested parties to comment on the draft Guidelines. The Commission made some changes to its initial draft following the comments submitted by Member States and interested third parties.

Background to and objectives of the CEEAG

The CEEAG are in line with the Commission’s climate ambitions. Their main objective is to provide a framework for Member States to achieve the objectives of the European Green Deal which is a package of measures to make Europe “climate neutral” by 2050 at the least possible cost for taxpayers and without undue distortions of competition.

Thus, the CEEAG aim at (i) broadening the categories of investments and technologies that Member States can support to cover new areas and technologies that can deliver the Green Deal and aid instruments; (ii) providing more flexibility for new technologies and new areas by simplifying the existing rules and introducing, for example, a simplified assessment of cross-cutting measures and eliminating the requirement for individual notification of large green projects within aid schemes previously approved by the Commission; (iii) introducing safeguards to ensure that aid is limited and necessary for climate and environmental protection and; (iv) ensuring coherence with relevant EU legislation and policies.

What’s new in the CEEAG?

To reflect the importance it attaches to climate protection, the Commission has decided to rename the title of the previous Guidelines to include climate aid.

Most of the categories of aid that were included in the previous guidelines have been maintained. The CEEAG however cover a wider range of areas, sectors and technologies and offer more technical rules and more precise guidance for obtaining the Commission’s approval.

The main novelties of the CEEAG as compared to the previous Guidelines are the following:

• The CEEAG provide for 13 categories of aid of which the new categories are: (4.1) Aid for the reduction and removal of greenhouse gas emissions including through support for renewable energy and energy efficiency. While the category of aid for renewable energy was already included in the previous Guidelines, the CEEAG present them as a “catch-all” provision, with the intention of encompassing all technologies that can contribute to it and allow the Guidelines to be as open-ended as possible; (4.2) Aid for the improvement of the energy and environmental performance of buildings. A similar category of aid was already covered by the GBER, namely investment aid for energy efficiency projects in buildings in the form of financial instruments; (4.3) Aid for clean mobility that now feature a dedicated section covering aid for the acquisition of clean vehicles and retrofitting of vehicles, as well as a section dedicated to the deployment of recharging and refueling infrastructure (and that are therefore no longer limited to the acquisition of clean vehicles and retrofitting of vehicles); (4.4) Aid for resource efficiency and for supporting the transition towards a circular economy (and that are therefore no longer limited to waste management); (4.12) Aid for the closure of power plants using coal, peat or oil shale and of mining operations relating to coal, peat or oil shale extraction
• Regarding aid for the remediation of environmental damage, the rehabilitation of natural habitats and ecosystems, the protection or restoration of biodiversity and the implementation of nature-based solutions for climate change adaptation and mitigation, the amount of aid may cover 100% of the eligible costs, minus the increase in the value of the land.
• Aid in the form of reductions in taxes or parafiscal levies are no longer limited to support for energy from renewable sources.
• While energy-intensive users were already eligible for reductions in taxes under the previous guidelines, the CEEAG include a specific category of aid that has been extended to other sectors and sub-sectors. They also provide for transitional rules allowing energy-intensive users to make a gradual but complete adjustment of their existing scheme to the conditions that are set out in Section 4.11 of the CEEAG by 2028.
• The CEEAG require Member States to carry out, from 1 July 2023 and above certain thresholds, public consultations regarding aid for the reduction and removal of greenhouse gas emissions including through support for renewable energy and energy efficiency as well as regarding aid for the security of electricity supply in order to verify the need for such aid.
• The limitation of maximum aid intensity (i.e., the maximum amount of aid in relation to eligible costs that Member States are allowed to pay) has been lowered for a wide range of measures. In addition, the CEEAG no longer favour the predefined thresholds and move towards a more flexible system of competitive bidding processes. Open tenders for specific technologies are therefore encouraged. The CEEAG provide an open list of situations that justify technology specific tenders.
• The CEEAG also provide clarification to better align the security of supply rules with the Regulation 2019/943 on the internal market for electricity and to explain how the rules apply.

It should also be noted that large airports (over 5 million passengers per year) that were explicitly excluded from the previous Guidelines, are now covered by the CEEAG and will thus be able to benefit from aid for energy and the environmental protection.

The CEEAG also offer greater flexibility to smaller players such as renewable energy communities, which have proliferated in recent years, and to the SMEs by allowing Member States to exempt them from the competitive bidding process requirement when the installed capacity is below 6 MW.

Conclusion

The CEEAG sufficiently reveal the priority that the Commission reserves for this issue. They aim to create new categories of aid in line with the evolution of technology and of society and to phase out subsidies for energy sources that run counter its climate goals, such as fossil fuels.

The Commission believes that this approach and the reduction of the European Union’s dependence on fossil fuels imports will also help to reduce energy costs in the medium and long term.

Despite the downward revision of the maximum aid intensity rates, the CEEAG will undoubtedly increase the quantity, type and amount of public investments to fight global warming, protect the environment and further support green energy.

It should however be noted that the CEEAG tend to provide a framework for national support measures. It is now up to the Member States to mobilise their public resources to implement the opportunities provided by these CEEAG and to support businesses in reaching the ambitious targets set by the European Union.

Once the revision of the GBER will have been completed and will be published, Member States will have a complete view of the aid measures supporting the Commission’s green transition policies.

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