Commission approves €2.7 billion Austrian State aid scheme to support decarbonisation of industrial production processes

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

The European Commission has approved, under EU State aid rules, a €2.7 billion Austrian scheme to support companies active in the industrial sector to decarbonise their production processes. The measure will contribute to the implementation of Austria’s National Energy and Climate Plan and to the achievement of the European Green Deal targets, while helping to end dependence on Russian fossil fuels in line with the REPowerEU Plan.

The Austrian measure

Austria notified the Commission of its plan to support projects for the reduction of greenhouse gas emissions stemming directly from industrial installations, thereby contributing to the decarbonisation of industrial sectors and achieving the Austrian objective of climate neutrality by 2040.  

The aid be awarded through a competitive bidding process. The first auction is expected to be launched in 2024. Projects will be selected on the basis of (i) the level of aid requested per tonne of greenhouse gas emissions avoided, and (ii) qualitative criteria, such as project maturity, economic and ecological sustainability, encompassing amongst others innovativeness and efficient use of resources and energy. All supported projects will be required to use energy from renewable sources only.

The aid will take the form of direct grants, covering either (i) investment costs only (so-called ‘investment grants’), or (ii) both investment and operating costs (so-called ‘transformation grants’).

Selected beneficiaries for investment grants will receive aid for a share of the investment costs leading to the reduction of greenhouse gas emissions.

Selected beneficiaries for transformation grants will receive aid per tonne of greenhouse gas emissions avoided under contracts with a duration of up to 10 years. The aid amount will be adjusted annually to ensure that it only covers the actual cost difference between fossil-based and renewable-based production.

The scheme will run until 31 December 2030. It is expected to bring around 10.5 million tonnes of CO₂-equivalent savings until 2040.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, as well as under the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’), which allow Member States to support measures reducing or removinggreenhouse gasemissions.

The Commission found that:

• The scheme is necessary and appropriate to support the decarbonisation of production processes of companies active in industrial sectors.
• The scheme has an “incentive effect”, as potential beneficiaries would not carry out the investments without the public support.
• The scheme has a limited impact on competition and trade within the EU. In particular, the aid is proportionate and any negative effect on competition and trade in the EU will be limited in view of the design of the measure, which will ensure that the aid amount is kept to the minimum.
• The scheme will be subject to an ex-post evaluation, which will verify, among other things, the effectiveness of the competitive bidding process.

On this basis, the Commission approved the Austrian measure under EU State aid rules.

Background

The CEEAG provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

With the European Green Deal Communication in 2019, the Commission set an objective of net zero emissions of greenhouse gases in 2050 that is enshrined in the European Climate Law. In force since July 2021, the law also introduced the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030. Through the adoption of the ‘Fit for 55′ legislative proposals, the EU has in place legally binding climate targets covering all key sectors in the economy.

The non-confidential version will be made available under the case number SA.109730 in the State Aid Register on the Commission’s 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 Competition Weekly e-News.

Quote(s)

This €2.7 billion scheme will help Austrian industries decarbonise their production processes and achieve greater energy efficiency. The measure will also help Austria reduce its dependence on imported fossil fuels, while ensuring that any potential competition distortions are kept to a minimum.

Margrethe Vestager, Executive Vice-President in charge of competition policy