New Guidelines on aid for environmental protection and energy

Many thanks to Erika Szyszczak from Littleton Chambers for today’s blog post on the new Environmental and Energy Aid Guidelines

On 9 April the Commission adopted new Guidelines on environmental protection and energy state aid for the period 1 July 2014–31 December 2020. The Guidelines were adopted in the form of a Communication and will apply to all notified aid measures on which the Commission will decide after 1 July 2014, even where the funding projects were notified earlier.The publication of the Communication was accompanied by a Press Release and a set of Frequently Asked Questions (FAQ). The Guidelines replace the Commission’s 2008 Guidelines on State aid for environmental protection, and now include detailed rules regarding State aid in the energy sector.

Excluded Areas

Nuclear energy was omitted from the final draft. Thus the funding of investment in nuclear energy will continue to be assessed on a case-by case basis and the current investigation by the Commission into the UK’s funding of nuclear power at Hinckley Point will be scrutinised with interest. 

Other areas excluded from the Guidelines include

  • the design and manufacture of environmentally friendly products, machines or means of transport with a view to operating with fewer natural resources and action taken within plants or other production units with a view to improving safety or hygiene;
  • the financing of environmental protection measures relating to air, road, railway, inland waterway and maritime transport infrastructure;
  • stranded costs;
  • State aid for research, development and innovation which is subject to the rules set out in the Community framework for State aid for research and development and innovation;
  • State aid to biodiversity measures.

The Guidelines will not cover measures which fall within the General Block Exemption Regulation (GBER) (Para 4). Except if they are subject to a competitive bidding process which is presumed to result in minimum levels of aid. Tax exemptions and reductions in environmental taxes do not require an individual notification.

The Guidelines set out different thresholds for notification:

  • Investment aid: EUR 15m for any one undertaking
  • Operating aid for renewable energy and/ combined production of renewable heat: when generation capacity per site exceeds 250MW
  • Operating aid for bio-fuel production: when production exceeds 150,000 tonnes per year
  • Operating aid for co-generation: capacity exceeding 300MW
  • Aid for energy infrastructure: EUR 50m for any one undertaking in each investment project
  • Aid for carbon capture and storage: EUR 50m for each investment project
  • Aid for generation adequacy capacity: EUR 15m for each undertaking and project

The Commission may also require that certain aid schemes are subject to a time limitation (normally 4 years or less) and to evaluation, especially where there is a significant risk that competition may be distorted or restricted. (Para 4).

Measures Which Are Notifiable State Aid

The Guidelines set out the criteria that the Commission will use for assessing environmental and energy aid measures which amount to State aid and which must be notified.

In particular, the Guidelines set out in detail common assessment principles, criteria against which the Commission will assess the compatibility of an environmental and energy State aid measure. The measures must also be compatible other aspects of Union law, most notably the free movement rules of Article 34 TFEU and taxation in Article 110 TFEU. The criteria are that the measure:

  • contributes to a well-defined objective of common interest;
  • is needed in order to remedy a well-defined market failure;
  • is appropriate to address the objective of common interest;
  • incentivises market players to behave differently from how they would if the measure were not implemented;
  • is proportionate ;
  • avoids major negative effects on competition and interstate trade; and
  • is transparent as to both its form and its implementation.

The Guidelines apply the common assessment principles to specific types of environmental and energy aid measures, expanding upon the 2008 Guidelines.

  • State Aid to energy from renewable energy sources (3.3.)
  • Energy efficiency measures (3.4)
  • Resource efficiency measures: waste management (3.5)
  • Carbon capture and storage (CCS) (3.6)
  • Reductions or exemptions from environmental taxes and charges to fund energy from renewable sources (3.7)
  • Infrastructure: interconnections and cross-border networks (3.8)
  • Generation adequacy (3.9)
  • Tradable permit schemes (3.10)
  • Aid for the relocation of undertakings ( 3.11)
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