Commission approves €626 million Danish State aid scheme to support planting forests

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

The European Commission has approved, under EU State aid rules, a €626 million (DKK 4 672 million) Danish scheme to support afforestation. The measure will contribute to achieving the objectives of the EU’s Common Agricultural Policy by strengthening environmental protection and contributing to climate change mitigation and adaptation.

The Danish measure

Denmark notified the Commission of its plans to support landowners to convert agricultural land into forests. The scheme will cover the costs of planting forest on agricultural land, the costs of forest maintenance and the costs of foregone agricultural income. Additional compensation is also provided in the case of forest becoming ‘untouched forest’ for the additional restrictions imposed on the land . The scheme forms part of the Danish political agreement on the implementation of a green Denmark, which foresees the conversion of approximately 10% of Denmark’s total land area into nature and forest by 2045. The scheme will run until 31 December 2030.

Under the scheme, the aid will take the form of direct grants to owners of agricultural land suitable for afforestation. The aid will cover up to 100% of the eligible costs.

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 allows Member States to support the development of certain economic activities under certain conditions, and under the 2022 Guidelines for State aid in the agricultural and forestry sectors and in rural areas (‘2022 Agricultural Guidelines’).

The Commission found that:

•   The measure facilitates the development of an economic activity, namely the economic activity of owners of agricultural land suitable for afforestation;
•   The measure is necessary and appropriate to convert agricultural land into forest to meet the afforestation goals and foster the development of forestry in the context of climate change;
•   The aid is proportionate, as it is limited to the minimum necessary and will have a limited impact on competition and trade between Member States;
•   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 Danish scheme under EU State aid rules.

Background

The 2022 Agricultural Guidelines provide guidance on how the Commission assesses the compatibility of State aid measures in the sector under Article 107(3)(c) TFEU. The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support and contribute, among other things, to the objectives of the Common Agricultural Policy. The 2022 Agricultural Guidelines aim to help Member States design national measures and meet national and EU’s goals at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

The non-confidential version of the decision will be made available under the case number SA.118866 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.

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