The European Commission launched its final (third) consultation on new guidelines on environmental state aid - now to include energy and infrastructure - for 2014-2020 in December. 

Modernisation and simplification

The Commission hopes that the new rules will contribute to the modernisation of state aid control in providing a simpler and more consistent framework for assessment.  The draft reflects the application of common assessment principles (TFEU article 107(3) generally) heralded in the May 2012 Communication on state aid modernisation, as well as the appropriate use of the more specific criteria for the compatibility assessment of projects of common European interest (TFEU article 107(3)(b)) and for the development of certain economic activities which do not adversely affect trading conditions to an extent contrary to that common interest (TFEU article 107(3)(c)).

Interplay of the Guidelines and other state aid measures

The Guidelines identify a number of specific environmental and energy measures for which aid may be compatible with TFEU articles 107(3)(b) or (c). 

Where some of these measures comply with certain strict rules, they may be eligible under the General Block Exemption for state aid (GBER) for exemption from pre-notification requirements.  The Commission’s modernisation plan also encompasses an update to the GBER, on which a final consultation is running in parallel with that on the Guidelines.  The Commission proposes to revise and extend the list of environmental and energy measures which may benefit from the GBER.  It intends that the new GBER should be finalised in the first half of 2014.

The Guidelines do not apply to state aid for research, development and innovation (R&D&I).  The consultation on revised guidelines on R&D&I is covered in our Law-Now alert of 10 January 2014.  The specific issue of stranded costs remains subject to the regime set out in the Commission’s 2001 Communication.  State aid for biodiversity measures are also outside the Guidelines, but usually fall within the scope of the rules on Services of General Economic Interest.

The Guidelines do apply to sectors (transport, coal, agriculture, forestry, fisheries) which are subject to their own EU state aid rules, unless those sectoral rules specifically provide otherwise.

Main themes

The main themes of the Guidelines were announced by the Commission as follows.

Renewables: to facilitate the decarbonisation of energy supply and the integration of the EU internal energy market.  Aid for renewables should reflect the increasing penetration and the decreasing costs of renewable energy, and move to a “more market friendly” support in the form of market premiums (supplements to the wholesale price) or certificate schemes (markets for tradable certificates between producers and suppliers). 

Infrastructure: recognising that energy infrastructure needs to be modernised to achieve the EU climate and energy targets, as well as the integration of the energy market, to include for the first time rules for assessing energy infrastructure support.  Aid to infrastructure should focus on projects to improve cross-border energy flows and to promote infrastructure in less developed regions.

Generation adequacy: to address the basis on which Member States may establish schemes such as capacity mechanisms to encourage the building of new capacity or prevent the shutting down of existing plants.  Such support would be allowed only if additional energy infrastructure or alternative measures - examples given are a “more responsive demand side” or electricity storage - cannot address concerns about flexibility of capacity.

Specific measures

Specific measures identified in the Guidelines are:

  • Aid for going beyond EU standards or increasing the level of environmental protection in the absence of EU standards
  • Investment aid for early adaptation to future EU standards
  • Investment aid for environmental studies
  • Operating aid in the form of reductions in or exemptions from environmental taxes
  • Investment aid for the remediation of contaminated sites
  • Investment aid for resource efficiency and waste management
  • Investment and operating aid for energy from renewable sources
  • Operating aid in the form of reductions in funding support for electricity from renewable sources
  • Investment and operating aid for energy-efficiency
  • Investment and operating aid for cogeneration installations
  • Investment aid for district heating and cooling
  • Operating aid in the form of tradable permits
  • Investment aid for CO2  capture, transport and storage (CCS) including individual elements of a CCS chain
  • Investment for energy infrastructure
  • Investment and operating aid for generation adequacy measures

The Guidelines address each of these measures in terms of the application of relevant common principles and specific compatibility requirements.

Next steps

The current state aid guidelines on environmental protection cover the period 2008 to end 2014.  The deadline for responses to the Consultation is 14 February.  The Commission hopes to implement the new rules before summer 2014.