Commission approves €128 million Swedish State aid measure to support SSAB in decarbonising its steel production

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

he European Commission has approved, under EU State aid rules, a €128 million Swedish measure to support SSAB in decarbonising its steel production. The measure will contribute to the achievement of the European Green Deal and the Green Deal Industrial Plan targets, while also helping to end dependence on Russian fossil fuels and accelerate the green transition, in line with the REPowerEU Plan.”

The Swedish measure

Sweden notified to the Commission a €128 million measure to support SSAB’s project to transition from the current coal-based steel production process in Luleå to a nearly zero-emission system. The measure will be made available through the Just Transition Fund.

The aid will take the form of a direct grant and will support the accelerated transition to an electric steel mill through the installation ofan electric arc furnace, equipment for secondary metallurgy and a caster. The electric arc furnace will operate using steel scrap and direct reduced iron produced using renewable hydrogen. The electric steel mill will have a capacity of 2.5 million tonnes of green slabs per year.

The measure will accelerate the project by three years and the new installation is envisioned to start producing green steel as of 2029. The measure allows for significant CO₂ emission savings corresponding to three years of operation using fossil fuels. SSAB has committed to actively share the experience and technical know-how gained through the project with industry and academia.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables EU countries to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’), which allow Member States to support measures reducing or removing CO₂ emissions.

The Commission found that:

• The measure facilitates the development of an economic activity, namely steel production through low-carbon processes. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal, the Green Deal Industrial Plan and the REPowerEU Plan.
• The aid has an ‘incentive effect’, as the beneficiary would not carry out the investments in green steel production without the public support.
• The measure is necessary and appropriate to promote the production of green steel. In addition, it is proportionate, as the level of the aid corresponds to the effective financing needs.
• The measure has sufficient safeguards to ensure that undue distortions of competition are limited. In particular, if the project turns out to be very successful, generating extra net revenues, the beneficiary will return to Sweden part of the aid received (claw-back mechanism). Moreover, the beneficiary will disseminate the technical know-how gained through the project.
• The aid brings about positive effects that outweigh any potential distortion of competition and trade in the EU.

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

Background

The 2022 CEEAG provide guidance on how the Commission will assesses 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.

The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.

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.

In February 2023, the Commission published the Green Deal Industrial Plan to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality.

The non-confidential version of the decision will be made available under the case number SA.109640 in the State Aid Register on the DG 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.

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