State aid in the energy sector

As a result of the liberalisation of the energy sector and its exposure to market competition, public funding in this sector must be granted in compliance with State aid rules. Pursuant to Article 107(1) TFEU, State aid is prohibited unless it can be authorised by the European Commission following a determination of its compatibility with the internal market (see the chapter on the Notion of State aid).

To implement the European Green Deal adopted by the Commission in 2019 and as highlighted by the State aid Fitness Check conducted that same year, additional investments in the energy sector are essential. Achieving the green transition objectives, including net-zero greenhouse gas emissions by 2050, and enhancing the resilience of the EU economy will require both significant private and public funding. The energy crisis has emphasised the urgent need to ensure a rapid transition and to allocate significant financial resources to this end.

In response, the Commission has revised existing State aid regulations and guidelines and adopted new ones that expand the categories of compatible aid to facilitate and allow for public funding for energy projects and sustainable investments to meet the objectives of the European Green Deal. State aid plays a pivotal role in the energy sector, enabling governments to actively support and invest in strategic energy initiatives.

The State aid rules that could apply to the energy sector are stated in common provisions, including: (1) the General Block Exemption Regulation ("GBER"); (2) the Important Projects of Common European Interest ("IPCEI"); and (3) the framework for Research, Development and Innovation ("RDI"); as well as in specific provisions applicable to the energy sector, including: (i) the Climate, Energy and Environmental Aid Guidelines ("CEEAG"); (ii) the Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post-2021 ("ETS State Aid Guidelines"); (iii) the State aid to green transport Regulation (“Regulation 2022/2586”) and (iv) the Clean Industrial State Aid Framework ("CISAF").

This chapter focuses on the GBER amended in 2023, the CEEAG adopted in 2022 and the CISAF that entered into force in June 2025.

Some of the aid measures granted in the energy sector may be exempted from the prior notification obligation to the Commission as they fall within the scope of block-exemption rules, in particular the General Block Exemption Regulation (GBER) (see the chapter on Procedural aspects).

Under the GBER, the following categories of aid are exempted from the obligation for prior notification, provided that the general conditions of the GBER and the specific conditions for each of these aid categories are fulfilled:

1. investment aid for environmental protection, including decarbonisation;
2. investment aid for recharging or refuelling infrastructure;
3. investment aid for the acquisition of clean vehicles or zero-emission vehicles and for the retrofitting of vehicles;
4. investment aid for energy efficiency measures other than in buildings;
5. investment aid for energy efficiency measures in buildings;
6. aid for the facilitation of energy performance contracting;
7. investment aid for the promotion of energy from renewable sources, of renewable hydrogen and of high-efficiency cogeneration;
8. operating aid for the promotion of energy from renewable sources and of renewable hydrogen in small projects and renewable energy communities;
9. investment 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;
10. investment aid for energy-efficient district heating and/or cooling;
11. investment aid for resource efficiency and for supporting the transition towards a circular economy;
12. investment aid for energy infrastructure; and
13. aid for studies and consultancy services on environmental protection and energy matters.

In 2023, the Commission revised the GBER to align it more closely with the objectives of the European Green Deal and to complement the CEEAG. This revision, the so-called "2023 Green Deal GBER Amendment", aims to facilitate the implementation of aid measures that support the EU's green transition policies. A key objective was to ensure that the CEEAG work in tandem with the GBER.

The impact of the revision of the GBER on the energy sector is twofold, as it:

1. provides for broader aid categories for green projects than the previous version of the GBER; and
2. raises notification thresholds for green projects, thereby facilitating the granting of State aid without prior approval by the Commission.

Specifically, the 2023 Green Deal GBER Amendment (i) extends the possibilities for aid in the area of environmental protection and energy; (ii) increases the aid intensities as well as the notification thresholds for several categories of aid; and (iii) covers aid measures set up by Member States to regulate prices for energy such as electricity, gas and heat produced from natural gas or electricity.

The Commission's revised Guidelines on State aid for climate, environmental protection and energy (CEEAG), adopted on 27 January 2022, are a cornerstone in the pursuit of the European Green Deal objectives.

The CEEAG replace the Guidelines on State aid for environmental protection and energy 2014–2020, which were extended by one year in 2020.

The CEEAG provide guidance on how the Commission assesses the compatibility of aid measures that fall outside the scope of the GBER. This may occur when the relevant aid category is not covered by the GBER (e.g. an aid for the development of new energy technologies), when the amount of aid exceeds the applicable notification threshold (e.g. the notification threshold of EUR 30 million introduced by the Green Deal GBER Amendment for investment aid for energy efficiency projects) or when the conditions of the aid (e.g. aid intensity, eligible costs, etc.) are more favourable than the ones foreseen under the GBER.

The CEEAG therefore apply to aid subject to the notification requirement under Article 107(3)(c) TFEU. Their purpose is to provide the conditions that an individual aid measure or an aid scheme must fulfil in order to be authorised in the context of a notification to the Commission.

The CEEAG are aligned with the Commission's climate ambitions and serve as a strategic framework to help Member States achieve the objectives of the European Green Deal, a package of measures to make Europe "climate neutral" by 2050. This framework seeks to minimise costs to taxpayers while limiting distortions to competition and trade.

To this end, the CEEAG pursue several key goals: (i) broaden 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) provide greater flexibility for new technologies and new areas by simplifying the existing rules, for example by introducing a simplified assessment of cross-cutting measures and removing the requirement for individual notification of large green projects within aid schemes previously approved by the Commission; (iii) introduce safeguards to ensure that aid is limited and necessary for climate and environmental protection; and (iv) ensure coherence with relevant EU legislation and policies.

Thirteen categories of aid are covered by the CEEAG.

Most of the categories of aid that were included in the previous Guidelines have been retained. However, the CEEAG cover a wider range of areas, sectors and technologies, and provide more technical rules and more precise guidance on how to obtain Commission approval.

These new categories include:

• (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 it as a "catch-all" provision, with the intention of encompassing all technologies that can contribute to this objective and allowing 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 is also covered by the amended GBER, namely investment aid for energy-efficiency measures in buildings;
• (4.3) Aid for clean mobility, which now features a dedicated section on aid for the purchase of clean vehicles and retrofitting of vehicles, as well as a section dedicated to the deployment of recharging and refuelling infrastructure (and is therefore no longer limited to the purchase of clean vehicles and retrofitting of vehicles);
• (4.4) Aid for resource efficiency and for supporting the transition towards a circular economy (one that is therefore no longer limited to waste management); and
• (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.

It should also be noted that:

• Aid in the form of reductions in taxes or parafiscal levies is no longer limited to support for energy from renewable sources.
• While energy-intensive users were already eligible for tax reductions under the previous Guidelines, the CEEAG include a specific category of aid that has been extended to other sectors and subsectors. 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 provide clarification to better align the security of supply rules with Regulation 2019/943 on the internal market for electricity and to explain how the rules apply.
• Large airports (over five million passengers per year), which were explicitly excluded from the previous Guidelines, are now covered by the CEEAG and can therefore benefit from aid for energy and environmental protection.
• The CEEAG offer greater flexibility to smaller players such as renewable energy communities and to SMEs by allowing Member States to exempt them from the competitive tendering requirement if the installed capacity is below 6 MW.

Some categories of aid measures are explicitly excluded from the scope of the CEEAG, such as:

• State aid for nuclear energy, which has to be evaluated under the Euratom Treaty and general State aid rules; and
• all aid measures falling under sector-specific rules that contain provisions on environmental protection and energy, such as State aid for research, development and innovation, which is dealt with under the RDI framework.

State aid can be granted under the CEEAG if the following positive and negative conditions are met:

• (+) The aid measure must facilitate the development of the economic activity and must therefore:
  • benefit society and contribute to the successful implementation of EU climate, environmental and energy policy;
  • have an incentive effect, i.e. induce the beneficiary to change its behaviour to engage in more environmentally friendly economic activity; and
  • not breach other relevant provisions of EU law.
• (–) The aid measure must not unduly affect trading conditions to an extent contrary to the common interest and must therefore:
  • be necessary, i.e. bring a material development that the market alone cannot deliver;
  • be appropriate, i.e. the same result cannot be achieved by an alternative measure or less distortive aid instrument;
  • be proportionate, i.e. the aid amount per beneficiary is limited to the minimum needed to meet the objective of the aid measure;
  • be transparent, i.e. must be published as required by the CEEAG; and
  • not generate or threaten to generate distortions of competition and have an effect on trade between Member States.

In its assessment of aid measures, the Commission balances their negative effects on competition and trade against their positive effects on the supported economic activities, including their contribution to the EU's environmental protection and energy policy objectives. The State aid measures whose positive effects outweigh the negative effects may be authorised.

Beyond these general conditions, the CEEAG set out specific rules for each of the thirteen aid categories they cover.

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 as compared with the previously applicable Guidelines.

In addition, the CEEAG no longer favour the predefined thresholds and they move towards a more flexible system of competitive tendering. Open tenders for specific technologies organised by Member States are therefore encouraged. The CEEAG set out an open list of situations that justify technology-specific tenders.

Member States may fund up to 100% of the eligible costs (minus the increase in the value of the land) for decarbonisation projects where:

1. this leads to accelerated decarbonisation that the market would not have delivered; and
2. there is no overcompensation of the beneficiaries.

Cumulation with other aid measures (e.g. the RAG or de minimis aid) is allowed, provided that the total amount of aid for a project or activity does not lead to overcompensation or exceed the maximum aid amount allowed under the CEEAG.

Member States had to adapt their existing aid schemes approved under the previous Guidelines by 31 December 2023.

The CEEAG also 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 ETS State Aid Guidelines provide for the compatibility conditions of the aid that may be granted by Member States to compensate a certain number of electro-intensive users (i.e. undertakings active in sectors with high electricity consumption) for part of their higher electricity costs. The aid provided for under these guidelines must be priorly notified to the Commission and formally authorised before being granted.

As part of the Clean Industrial Deal ("CID") initiative, the European Commission adopted the Clean Industrial State Aid Framework ("CISAF"), which sets out the conditions under which the European Commission will authorise public support granted by Member States for targeted green investments. These include measures for industrial decarbonisation, the deployment of renewable energy technologies and reducing the European Union's dependence on foreign fossil fuels.

The CISAF came into force on 25 June 2025 and replaces the Temporary Crisis and Transition Framework ("TCTF"). The TCTF was originally established to support the economy and put in place measures to counter the energy crisis following the aggression against Ukraine by Russia and to cover aid to achieve the European energy autonomy and its transition towards a net-zero industry. The CISAF builds on the TCTF and provides for even broader support schemes aimed at accelerating the green transition.

The CISAF distinguishes the following categories of aid:

• aid to accelerate the rollout of clean energy and support electricity costs in line with the CID objectives, including:
  • aid schemes to accelerate the rollout of renewable energy;
  • aid schemes to accelerate the rollout of low-carbon fuels;
  • aid for non-fossil flexibility support schemes; and
  • temporary electricity price relief for energy-intensive users;
• aid for decarbonisation of industry;
• aid to ensure sufficient manufacturing capacity in clean technologies;
• schemes to support specific innovation fund projects; and
• aid to reduce risks of private investments related to CID objectives.

The CISAF sets out that State aid must meet two cumulative conditions to be approved: (i) the aid facilitates the development of an economic activity (positive condition) and (ii) the aid does not unduly affect trading conditions to an extent contrary to the common interest (negative condition).

In comparison with the CEEAG, the CISAF provides for simpler compatibility conditions (lower burdens in terms of tenders and public consultation, simplified methods to evaluate the aid amount, safe harbours for compliance requirements, etc.). The notification process is also speeded up.

The CISAF will be in force until 31 December 2030.

The Commission adopted the Important Projects of Common European Interest ("IPCEI") framework, which allows Member States to assist large and highly innovative projects of common European interest (see the chapter on the Important Projects of Common European Interest framework). Through this framework, the Commission supports, for instance, the development of an innovative and sustainable European hydrogen industry. The aid provided for under the IPCEI must be notified to the Commission and formally authorised before being granted.

The Commission adopted the framework for Research, Development and Innovation ("RDI"), which provides for the compatibility conditions of State aid for RDI that cannot be exempted from notification on the basis of the GBER (see the chapter on State aid for research and development and innovation). The EU has set the strategic objectives of research, development and innovation to help bring about a green and digital transition. Aid provided for under the RDI must be priorly notified to the Commission and formally authorised before being granted.

The Council Regulation of 19 December 2022 on the application of Articles 93, 107 and 108 TFEU to certain categories of State aid in the rail, inland waterway and multimodal transport sector aims at simplifying the administration of State aid where distortion to competition is minimal. Currently, such aid is not covered by the GBER and has to be notified to the European Commission. It does so by allowing the Commission to use regulations to rule that certain categories of State aid are compatible with the internal market and do not need to be notified under Article 108(3) TFEU. In June 2025, the European Commission submitted a draft Exemption Regulation to the Member States. The Regulation is expected to be adopted in the first trimester of 2026.

CMS lawyers represent both public authorities and private companies on all aspects of State aid rules in the energy sector. This includes:

• legal assessment of possible State aid;
• advice on the best provision to ensure compatibility of the aid measure;
• assisting in the alignment of existing aid schemes with the GBER and the CEEAG, where necessary;
• setting up aid schemes under the GBER and the CEEAG;
• assisting in the notification of State aid in the energy sector to the European Commission;
• assisting public authorities or beneficiaries in State aid investigations by the European Commission;
• drafting and lodging complaints with the European Commission; and
• litigation before national and EU courts.

The CMS State Aid Practice Area Group comprises 40 State aid law specialists practising State aid law in 17 jurisdictions located in 20 cities in Europe and beyond – all committed to assist you. 

Find your local contact person in our brochure, CMS State Aid Group.