State aid: Commission opens in-depth investigation into public support for expansion of LG Chem’s electric vehicles battery plant in Poland

vehicle

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has opened an in-depth investigation to assess whether €95 million of public support granted by Poland to chemical company LG Chem Group (“LG Chem”) for investing in the expansion of its battery cell production facility for electric vehicles (EV) in Biskupice Podgórne in the Dolnoślaskie region (Poland) is in line with EU rules on regional State aid.

Commissioner Margrethe Vestager, in charge of competition policy, said: “EU State aid rules enable Member States to foster economic growth in disadvantaged regions in Europe. At the same time, we need to ensure that the aid is really needed to attract private investments to the region concerned, and avoid that the recipient of the aid gains an unfair advantage over its competitors at the expense of taxpayers. We will carefully investigate whether Poland’s support was necessary to trigger LG Chem’s decision to expand its existing cell production facility in Poland, is kept to the minimum necessary and does not distort competition or harm cohesion in the EU.”

In 2017, LG Chem decided to invest more than €1 billion in the expansion of its production capacity of lithium-ion cells and battery modules and packs for electric vehicles in its existing plant in the Dolnoślaskie region of Poland. In 2019, Poland notified the Commission of its plans to grant €95 million of public support for the expansion.

EU State aid rules, in particular the Commission’s 2014 Regional State Aid Guidelines, enable Member States to support economic development and employment in the EU’s disadvantaged regions and to foster regional cohesion in the Single Market. The measures need to fulfil certain conditions to make sure that they have the intended positive effect. This includes that the support must incentivise private investment, be kept to the minimum necessary, must not lure away investment from a region in another Member State which is at least as disadvantaged (“anti-cohesion effect”) and must not be directly causing the relocation of activities (such as jobs) to the Member State granting the support from elsewhere in the EU.

At this stage, the Commission has doubts that the planned public support of €95 million to LG Chem for the expansion of the Biskupice Podgórne plant complies with all relevant criteria of the Regional Aid Guidelines. In particular:

  • the Commission has doubts about whether the measure has an “incentive effect”, i.e. whether the decision by LG Chem to expand its battery production capacity in Poland was directly triggered by the Polish public support or whether the investment would have been carried out in Biskupice Podgórne, even absent the public support;
  • the Commission has doubts about the public support’s contribution to regional development and its appropriateness and proportionality;
  • the Commission cannot exclude at this stage that the public support exceeds the maximum permissible aid intensity for the project.

The Commission will now investigate further to determine whether the initial concerns are confirmed. The opening of an in-depth investigation provides Poland and interested third parties with an opportunity to comment on the measure. It does not prejudge in any way the outcome of the investigation.

Background

In 2019, the Commission approved a €36 million investment aid granted by Poland to support LG Chem’s €325 million investment for the creation of the Biskupice Podgórne in the Dolnoślaskie region of Poland. The Commission assessed and approved the measure under the 2014 Regional Aid Guidelines.

Evidence shows that large companies take decisions to invest in a given region not only due to State aid, but based on numerous factors, including the cost and availability of labour and land, tax legislation, their existing operations in the given region, proximity to clients, and the business environment. Granting aid in a context where a large company would have invested in any event would merely reduce the company’s ordinary operating costs, which its competitors have to meet without aid. This leads to competition distortions at the expense of taxpayers.

The Commission’s 2014 Regional Aid Guidelines allow Member States to support regional investment to support economic development and employment in the EU’s less developed regions and to foster cohesion in the Single Market, if the measure respect a number of conditions:

  • The aid must have a real “incentive effect”, in other words, it must effectively encourage the beneficiary to invest in a specific region;
  • The aid must be kept to the minimum necessary to attract the investment to the disadvantaged region;
  • The aid must not have undue negative effects, such as the creation of excess capacity in a declining market;
  • The aid must not exceed the regional aid ceiling applicable to the region in question;
  • The aid must not directly cause the relocation of existing or closed down activities from elsewhere in the EU to the aided establishment; and
  • The aid must not divert investment away from another region in the EU, which is at least as economically disadvantaged as the region where the aided investment takes place.

The non-confidential version of the decision will be made available under the case number SA.53903 in the State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Syria: Civilians caught in crossfire, UN refugee chief urges Jordan to open its border

Miguel Arias Cañete European Commission

EU should invest more in climate and not sit back on its laurels and watch

Partner countries get €3bn in loans to prop up economies affected by pandemic

Here are five tips to make your message clear in a crowded world

Autonomous vehicles could clog city centres: a lesson from Boston

Banks launch green charter to help shipping reduce its carbon footprint

What is a ‘vaccine passport’ and will you need one the next time you travel?

Migrants, asylum seekers detained in Hungary ‘deliberately deprived of food’: UN human rights office

A new approach to scaling-up renewable power in emerging markets

Think you’re safe at home? Think again. 5 household demons to be mindful about

Syrian refugees in Jordan and Lebanon should be free to earn a living

Migration crisis update: mutual actions and solidarity needed as anti-migrant policies thrive

End ‘cycle of violence’ in Gaza, UN deputy chief tells forum on Palestine

Macro-Financial Assistance: Europe’s way to control Ukraine?

The UK’s River Thames has come back to life – with a seal population to prove it

Commission takes further action to ensure professionals can fully benefit from the Single Market

MEPs push for high ambitions at the COP25 in Madrid

Close to 7,000 evacuated from Syrian towns after enduring nearly 3-year siege

Coronavirus could trigger a hunger pandemic – unless urgent action is taken

Intensifying Negotiations on transatlantic Data Privacy Flows: A Joint Press Statement by European Commissioner for Justice Didier Reynders and U.S. Secretary of Commerce Gina Raimondo

5 Black heroes of the environmental movement

Why digital inclusion must be at the centre of resetting education in Africa

Here’s how we can rethink the way we eat meat

Europe’s richest regions actively seek investment from China’s biggest banks

A Union that strives for more: the first 100 days

Why rich countries are seeing more poverty

Mali just took a huge step towards universal healthcare

Can Europe and the US reverse their nationalist and xenophobic drift? Is the West becoming belligerent?

On the first day of 2019, over 395,000 babies to be born worldwide: UNICEF

3 ways business leaders can build digital trust

First EU collective redress mechanism to protect consumers

FROM THE FIELD: For refugees and migrants in Europe, healthcare’s essential but a challenge to find

GSMA head urges regulators to help Europe regain leadership

EU budget: Commission helps prepare new Cohesion programmes with Regional Competitiveness Index and Eurobarometer

A breath of fresh air: How three disused industrial areas became beautiful parks

New rules to help consumers join forces to seek compensation

Eurogroup: IMF proposes Germany disposes

Launch of Pact for Youth: European Youth Forum calls for real business engagement

We need to measure innovation better. Here’s how

Internet milestone reached, as more than 50 per cent go online: UN telecoms agency

Young activists share four ways to create a more inclusive world

ILO discusses world of work response to global refugee crisis

Tougher defence tools against unfair imports to protect EU jobs and industry

The EU Commission does nothing about the food retailing oligopoly

Do the giant banks ‘tell’ Britain to choose a good soft Brexit and ‘remain’ or else…?

Is Eurozone heading towards a long stagnation?

Euronest: delivering reforms is the best way forward for EU’s Eastern Partners

Gender equality and medicine in the 21st century: an equity unachieved

How we measure stakeholder capitalism will determine our recovery

The European Union’s Balkan Double Standard

Sustainable Development Summit: ‘We must step up our efforts – now’, Guterres declares

Is there a de facto impossibility for the Brexit to kick-start?

World Migratory Bird Day highlights deadly risks of plastic pollution

Migration surge leaves children stranded, begging on Djibouti’s streets

Cross-border cooperation: the EU Interreg programme celebrates 30 years of bringing citizens closer together

2,300 migrant children in Central American ‘caravan’ need protection, UNICEF says

Bringing nuclear test ban treaty into force a ‘central pillar’ of global disarmament push, says UN chief

HPV vaccine: the silver bullet that saves women

Are we at the edge of anti-vaccination health crisis?

Wednesday’s Daily Brief: #NoTobacco Day, China’s economy, family farming, #ClimateAction

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s