State aid: Commission invites interested parties to provide comments on proposed draft Climate, Energy and Environmental State aid Guidelines

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

The European Commission has launched today a targeted public consultation inviting all interested parties to comment on the proposed revision of the Guidelines on State aid for environmental protection and energy (“Energy and Environmental State aid guidelines” or “EEAG”). To cater for the increased importance of climate protection, the revised guidelines will go under the name of Climate, Energy and Environmental State aid guidelines (“CEEAG”). The proposed Guidelines also include compatibility rules for flagship areas like clean mobility infrastructure and biodiversity, as well as resource efficiency to support the transition towards a circular economy. Interested parties can respond to the consultation for eight weeks, until 2 August 2021.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Europe will need a considerable amount of sustainable investments. Although a significant share will come from the private sector, public support will play a role in ensuring that the green transition happens fast. So we want to make sure that our rules on State aid for climate, energy and environment are ready and fit for the green transition. The revised rules will enable Member States to fulfil the EU’s ambitious environmental objectives of the European Green Deal, while keeping possible competition distortions to a minimum. We now invite all interested parties to share their views.”

The Energy and Environmental State aid guidelines enable Member States to support projects for environmental protection (including climate protection and green energy generation), as well as measures to ensure energy generation adequacy, subject to certain conditions. The Guidelines aim at helping Member States meet their ambitious EU energy and climate targets, at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The Commission has conducted an evaluation of the current Guidelines as part of the State aid Fitness Check. The evaluation revealed that the current provisions of the Guidelines work well, they are overall fit for purpose and are an effective tool when it comes to supporting the achievement of the EU’s environmental goals and climate targets, while limiting undue distortions in the Single Market.

At the same time, the evaluation showed that some targeted adjustments, including simplifying and updating certain provisions and extending the scope of the Guidelines to cover new areas such as clean mobility and decarbonisation may be needed. Furthermore, the evaluation showed that the current rules may need to be aligned with the Commission’s strategic priorities, in particular those of European Green Deal, and with other recent regulatory changes in the energy and environmental areas.

In this context, the Commission is proposing a number of changes to the current rules, namely:

• Broadening the scope of the Guidelines to enable support in new areas (e.g. clean mobility, energy efficiency in buildings, circularity and biodiversity) and to all technologies that can deliver the Green Deal, including support for renewable energy. The revised rules would generally allow for aid amounts covering up to 100% of the funding gap and to introduce new aid instruments, such as Carbon Contracts for Difference.
• Increasing flexibility and streamlining the existing rules, by introducing a simplified assessment of cross-cutting measures under a single section of the Guidelines and eliminating the requirement for individual notifications of large green projects within aid schemes previously approved by the Commission.
• Introducing safeguards to ensure that the aid is effectively directed where it is necessary to improve climate and environmental protection, is limited to what is needed to achieve the environmental goals and does not distort competition or the integrity of the Single Market. For example, under some circumstances, Member States setting up a support scheme will have to consult stakeholders on its main features.
• Aligning and ensuring coherence with the relevant EU legislation and policies in the environmental and energy fields, by, among others, phasing out subsidies for fossil fuels, in particular those that are most polluting, and for which a positive assessment by the Commission under State aid rules is unlikely in light of their important negative environmental effects. Measures involving new investments in natural gas will be covered by the Guidelines, only insofar as it is demonstrated that the investments are compatible with the Union’s 2030 and 2050 climate targets.

The draft Guidelines and all other information about the public consultation, including more details about the proposed changes, are available online.

Next steps

In addition to the targeted public consultation launched today, the draft text of the Climate, Energy and Environmental State aid guidelines will also be discussed in a meeting between the Commission and Member States that will take place towards the end of the consultation period. This process will ensure that both Member States and other interested parties will have sufficient opportunities to comment on the draft Commission proposal.

The adoption of the new Guidelines is foreseen for the end of 2021.

Background

The current Guidelines on State aid for environmental protection and energy set out the conditions under which State aid for energy and environmental protection may be considered compatible with the Single Market. In particular, the Guidelines promote a gradual move to market-based support for renewable energy and introduce provisions for aid to energy infrastructure and generation capacity to strengthen the Single Market and ensure security of supply. Furthermore, the Guidelines provided criteria on how Member States can relieve energy intensive companies from charges levied for the support of renewables.

The provisions of the Guidelines are complemented by the General Block Exemption Regulation (“GBER”), which lays down ex ante compatibility conditions on the basis of which Member States can implement State aid measures without prior notification to the Commission. The GBER is currently undergoing a partial revision and a public consultation on the proposal for those revised provisions is expected to take place in summer 2021.

The revision of the Guidelines relies on the evaluation and on various sources of evidence and data, including case practice, an external study and input from stakeholders. The Commission has collected views through an open public consultation carried out in 2020. In Autumn 2020, the Commission also launched a European debate on how competition policy can further support the objectives of the European Green Deal, with a view to ensure that competition rules and sustainability policies work together in the best possible way. The process started with a call for contributions and was followed-up by a conference hosted by Executive Vice President Margrethe Vestager in February 2021. The over 200 contributions received have also fed in to the work on the draft revision of the Guidelines.

This will be supplemented with the feedback received from the present public consultation.