State aid: Commission invites comments on draft proposal to further facilitate implementation of aid measures promoting the green and digital transition

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

The European Commission is inviting Member States and all other interested parties to comment on certain proposed amendments to the General Block Exemption Regulation (GBER). The purpose of the proposed revision is to reflect the changes to various sets of State aid Guidelines, which are currently being reviewed and to further facilitate public support for the EU’s green and digital transition. The new rules will help set the right foundations for a sustainable economy in a time of recovery from the effects of the coronavirus pandemic. Member States and other interested parties can respond to the consultation until 8 December 2021.

Executive Vice-President Margrethe Vestager, in charge of competition policy, stated: “Our proposal aims at broadening the possibilities for Member States to implement aid measures supporting the green and digital transition without prior notification and approval by the Commission. This will make it easier and faster for Member States to provide such funding, without causing undue distortions of competition in the Single Market. We encourage all public authorities, companies and other interested parties to participate in this important consultation.“

The GBER declares specific categories of State aid compatible with the Treaty, provided that they fulfil certain conditions, and exempts these categories from the requirement of prior notification to and approval by the Commission.

Exempting certain aid from the obligation of prior notification to and approval by the Commission is a major simplification, which enables Member States to quickly provide aid, where conditions limiting the distortion of competition in the Single Market are met. It is important to find the right balance between block-exempting aid, subject to clear criteria to limit potential distortions of competition, and other State aid that needs to be assessed by the Commission before it can be implemented.

The rules laid down in the GBER are complementary to those set out in State aid Guidelines, which set the conditions under which the Commission assesses whether State aid measures that are not block-exempted and, therefore, need to be notified to it are compatible with the Single Market. Together, these two sets of rules form a comprehensive rulebook for certain areas of State aid law.

The Commission is therefore proposing a number of targeted changes to the GBER to reflect the changes in various sets of State aid Guidelines which are currently being reviewed (namely, the Regional Aid Guidelines, the Climate, Energy and Environmental State aid Guidelines, the Risk Finance Guidelines and the Research, Development and Innovation Framework). The aim of the ongoing revision of these Guidelines and of the proposed revision of the GBER is to promote public funding which contributes to the achievement of current EU priorities, notably the Green Deal and the European Industrial and Digital Strategies, and to ensure that State aid rules reflect the most recent market and technological developments.

In this context, the Commission is proposing a number of changes to the GBER in areas where also the corresponding State aid Guidelines are being revised. In particular:

Aid for environmental protection and energy

• Extending the possibilities for Member States to provide support for various types of “green” projects, such as, the reduction of CO₂ emissions, the rehabilitation of natural habitats and ecosystems, the protection and restoration of biodiversity, clean or zero-emission vehicles and recharging and refuelling infrastructure.
• Introducing new ‘green’ conditions that need to be fulfilled for large energy-intensive businesses to receive block-exempted aid in the form reduced tax rates under the Energy Taxation Directive. This will ensure that the aid will lead to an increase in energy efficiency and to investments in projects leading to substantial reductions of the beneficiary’s greenhouse gas emissions.
• Catering for the increased role of storage for the integration of renewable energy in the electricity system, by widening the existing exemptions for investment and operating aid for renewable energy to include storage projects that are directly connected to new or existing renewable energy generation facilities.
• Facilitating investments in green hydrogen, by providing block exemptions for investment aid for green hydrogen projects and investments in hydrogen infrastructure. In this respect, operating aid for small-scale installations for the promotion of green hydrogen will also be exempted from the notification requirement.
• Incentivising ambitious building renovation projects, by introducing a ‘green bonus’ (i.e. higher block-exempted aid intensities) for aid for improving the energy performance of buildings. The bonus will apply where energy performance improvements lead to a significant reduction in primary energy demand.

Aid for risk finance investment

• Clarifying and streamlining the rules on risk finance aid, in line with the parallel revision of the Risk Finance Guidelines, for example by clarifying the rules on eligibility for such aid under the GBER.
• Widening the scope of aid for start-ups to include aid in the form of transfer of intellectual property rights (IPR) from a research organisation where the underlying IPR has been developed to small and innovative enterprises that must bring a new product or service to the market.

Aid for research, development and innovation

• Simplifying the conditions for granting research, development and innovation aid without prior notification and approval, for example by including the possibility to calculate indirect costs of R&D projects through a simplified cost approach and the introduction of new compatibility rules for support to testing and experimentation infrastructures (sometimes also referred to as “technology infrastructures”).

Regional aid

• Aligning the conditions the new Regional Aid Guidelines, by, for example, extending the possibility to grant operating aid to prevent or reduce depopulation also in sparsely populated areas (until now only possible for very sparsely populated areas).

Next steps

In addition to the consultation launched today, the draft proposal will also be discussed in two meetings between the Commission and Member States, the first one take placing towards the end of the consultation period and the second one taking place once the draft is revised based on input received during the public consultation. This process will ensure that both Member States and other interested parties will have sufficient opportunities to comment on the draft Commission proposal.

The proposal under consultation and all details about the public consultation are available here.

The adoption of the revised GBER is planned for the first half of 2022.

Background

Article 108(3) of the Treaty on the Functioning of the European Union (TFEU) requires Member States to notify all State aid to the European Commission and to implement it only after the Commission’s approval. The EU State aid Enabling Regulation allows the Commission to declare that certain categories of State aid are compatible with the Single Market and exempted from the notification obligation provided for in the Treaty.

The General Block Exemption Regulation allows Member States to implement certain aid measures directly, with full legal certainty. The 2014 General Block Exemption Regulation enabled Member States to implement a wide range of State aid measures without prior Commission approval, because they are unlikely to distort competition, and has been modified several times to simplify the rules and increase the scope. As a result, more than 97% of all State aid measures are now implemented by Member States without the need for prior approval by the Commission. This is in line with the Commission’s approach to focus on delivering more and faster, while doing less where it does not have an added value.

As part of its ongoing review of competition rules to ensure they are fit for the changing market environment, in January 2019 the Commission launched an evaluation of certain State aid rules adopted as part of the 2014 State aid Modernisation package. The evaluation, which took the form of a Fitness check, covered, amongst others , the State aid guidelines on regional aid, on aid for research, development and innovation, on risk finance aid and on aid for environmental protection and energy. The evaluation showed that, overall, the State aid control system and rules are fit for purpose. However, it also showed that individual rules needed some adaptation, also in the light of the European Green Deal and the EU’s Industrial and Digital Strategies, as well as further streamlining. The Commission is therefore in the process of reviewing the relevant State aid Guidelines and the corresponding GBER rules.

Today’s proposal follows the recent amendment of the GBER that the Commission adopted in July 2021 to align the relevant State aid rules with funding rules under the new Multiannual Financial Framework. The Commission is now proposing a number of further adjustments to the GBER.