New State aid framework enables support for clean industry

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

The European Commission has today adopted a new State aid framework supporting the Clean Industrial Deal (CISAF), to enable Member States to push forward the development of clean energy, industrial decarbonisation and clean technology.

The CISAF sets out the conditions under which Member States can grant support for certain investments and objectives in line with EU State aid rules. Under the Framework, the Commission will authorise aid schemes introduced by Member States to boost clean industry, enabling the swift roll-out of individual aid. 

The CISAF will be in place until 31 December 2030, giving Member States and businesses long-term predictability. The CISAF replaces the Temporary Crisis and Transition Framework (TCTF), which was in place since 2022.

The framework simplifies State aid rules in five main areas:

1. the roll-out of renewable energy and low-carbon fuels;
2. temporary electricity price relief for energy-intensive users to ensure the transition to low-cost clean electricity;
3. decarbonisation of existing production facilities;
4. the development of clean tech manufacturing capacity in the EU, and;
5. the de-risking of investments in clean energy, decarbonisation, clean tech, energy infrastructure projects and projects supporting the circular economy.

In more detail, the framework allows for the following:

• A ‘fast-track’ for the rollout of clean energy.The new framework covers support for both renewable energy and low-carbon fuels. Renewables are essential for achieving the decarbonisation goals of the Clean Industrial Deal. The CISAF introduces simplified procedures to enable the quick roll-out of renewable energy schemes. Low-carbon fuels, such as blue and green hydrogen, also play a key role in reducing emissions. They support the transition for companies in ‘hard-to-decarbonise’ sectors, where more energy or cost-efficient options are not yet viable.
• New rules on flexibility measures and capacity mechanisms give Member States additional tools to integrate intermittent renewable electricity sources (i.e. wind and solar power) into the energy supply, while ensuring consumers benefit from reliable electricity supply. The CISAF defines ‘target model’ capacity mechanisms, where Member States pay electricity providers to maintain standby capacity, which can qualify for ‘fast-track’ approval. Other designs will be assessed under the Climate, Environmental protection and Energy Aid Guidelines (CEEAG).
• Support for electricity costs for energy-intensive users. Member States may provide electricity price support for companies operating in sectors particularly exposed to international trade, and heavily dependent on electricity for their production (energy-intensive users). This will allow Member States to reduce the electricity costs of energy-intensive users that face higher costs than competitors in regions with less ambitious climate policies. In return for receiving price support, companies will be required to invest in decarbonisation.
• Flexible support for investments in all technologies leading to decarbonisation or increased energy efficiency.

The framework allows for support for a wide array of decarbonisation technologies such as electrification, hydrogen, biomass, carbon capture utilisation and storage.

Support can be granted based on:

1. predefined aid amounts (for support up to €200 million);
2. the funding gap; or
3. a competitive bidding process.

• Support for clean tech manufacturing. The framework allows Member States to support investments in new manufacturing capacity for:

1. all manufacturing projects concerning technologies covered by the Net-Zero Industry Act in the form of schemes, and;
2. manufacturing projects in net-zero technologies on an individual basis when needed to avoid such investments being diverted away from Europe.

The framework also allows for support for the production and processing of critical raw materials necessary for clean technologies.

To safeguard cohesion between different regions in Europe, Member States will be able to provide more support for projects in less advantaged regions, which are defined in regional aid maps.

In addition, the framework allows Member States to stimulate demand for clean technology products by offering tax incentives, such as allowing companies to deduct the cost of clean technology investments from their taxable income more quickly.

• Measures to de-risk private investments in projects supporting the Clean Industrial Deal

Public and private investments must work in tandem to drive the transition to a decarbonised economy. Member States can take measures to de-risk private investments in projects covered by the framework, including energy infrastructure and circular economy. Support may take the form of equity, loans and/or guarantees provided to a dedicated fund or special purpose vehicle that will hold the portfolio of eligible projects.

Background

EU State aid rules exist to prevent government support leading to a company gaining a distortive advantage over its competitors.

Other State aid rules relevant to the Clean Industrial Deal (that is, the Climate, Environmental protection and Energy Aid Guidelines – the CEEAG) continue to apply in parallel and may be used by Member States for different and more complex support measures. Member States will also continue implementing State aid measures in this field under the General Block Exemption Regulation, without the need to notify them to the Commission.

The Commission has consulted Member States and stakeholders on the draft State aid framework. This was preceded by a Member State Survey on the use of the TCTF. The Commission took into account all contributions it received for the final version of the framework.

The details of this consultation and the contributions received are available online.