What to expect from the European Commission’s revised Climate, Energy and Environmental Aid Guidelines 2022?

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On 7 June 2021, the European Commission has launched a public consultation inviting interested parties to comment on the draft Guidelines on state aid for climate, environmental protection and energy. Interested parties can submit their comments to the Commission until 2 August 2021.

The European Commission has launched a public consultation on its revised Climate, Energy and Environmental Aid Guidelines. Interested parties can respond to the consultation on the Commission’s website until 2 August 2021. At the end of this consultation period, the Commission will organize the multilateral meeting with the Member States. The final draft of the Guidelines is expected to be adopted on 1 January 2022. These will replace the Guidelines on State aid for environmental protection and energy 2014-2020 that are still in force following an extension.

The Guidelines apply to aid of a certain size or that are not covered by the General Block Exemption Regulation (which avoids prior notification to the Commission). Their purpose is therefore to provide the conditions that an individual aid or an aid scheme must meet in order to be authorized by the Commission in the context of a notification by the Member State concerned.

Background to the draft Guidelines

The Guidelines on State aid for environmental protection and energy 2014-2020 were due to expire at the end of 2020. Although the Commission has extended these by one year, it did not remain inactive.

Indeed, the draft Guidelines that are submitted for consultation are in line with the Commission’s climate ambitions:

  • A first public consultation took place in 2020. During this consultation, the Commission received 300 contributions.

  • The European Green Deal, which is a package of measures to make Europe “climate neutral” by 2050, was presented in December 2019 and launched in December 2020.

  • Conferences and debates were organized by the Commission following this launch.

The Commission estimates that in order to meet the increased climate and energy targets for 2030, as set out in European Green Deal, an additional EUR 350 billion annual investment will be required.

The objectives of the draft Guidelines

The draft Guidelines aim at (i) alignment and compatibility/consistency of the rules set up in the Guidelines with the European Green Deal and other major EU principles/policies in the energy sector by broadening the scope of the Guidelines and (ii) providing the necessary flexibility for new technologies and areas by simplifying the existing rules.

The Commission also aims to help Member States achieve their energy and climate objectives at lower cost to taxpayers and without unduly distorting competition in the single market.

While the Commission has stated that state aid is unlikely to be granted for “measures involving support for the most polluting fossil fuels” and that only public funding for a truly green programme will be approved, the draft does foresee that natural gas could benefit from an exception if the investment is compatible with the 2030 climate target and the 2050 climate neutrality objective.

What’s new in the draft Guidelines?

To reflect the importance it attaches to climate protection, the Commission has decided to rename the title of the current Guidelines to include climate aid.

The main novelties of the revised Guidelines are the following:

  • The new Guidelines will provide for 13 categories of aid in Section 4. The new aid categories are: (4.1) aid for the reduction and removal of greenhouse gas emissions including through support of renewable energy; (4.3) aid for clean mobility; (4.4) aid for resource efficiency and for supporting the transition towards a circular economy; and (4.12) aid for coal, peat and oil shale closure. The Guidelines also cover support for hydrogen and other low-carbon gas infrastructure projects that can take a variety of forms, including upfront grants and contracts for ongoing support payments.

  • For certain categories of aid (including aid for the reduction and removal of greenhouse gas emissions, including through support for renewable energy and aid for clean mobility), the Guidelines will require Member States to carry out a public consultation on the measures in order to verify the necessity of the aid.

  • The limitation on maximum aid intensity (i.e. the maximum amount of aid that Member States are allowed to pay) in the current Guidelines has been lowered for a wide range of measures. The draft Guidelines move away from these predefined thresholds towards a more flexible system of tendering. The selection criteria will be based on the amount requested by the applicant put in direct or indirect relation to the contribution to the objective of the measure. In a few exceptional cases, justified by the Member State, other non-price selection criteria (such as additional environmental, technological or social criteria) may be considered, but these must account for not more than 25 % of the weighting of all the selection criteria.

  • For aid for the remediation of contaminated sites, for the rehabilitation of natural habitats and ecosystems and for biodiversity and nature-based solutions, the amount of aid may cover 100% of the eligible costs, minus the increase in the value of the land.

  • In order to ensure flexibility and simplification of the Guidelines, the Commission has introduced a simplified assessment of cross-cutting measures under a single section of the Guidelines and has eliminated the requirement for individual notifications for large green projects previously approved by the Commission.

  • While the category of aid for energy from renewable sources is already included in the current Guidelines, the new Guidelines present this as a “catch-all” provision, with the intention of encompassing all technologies that can contribute to it and allow the Guidelines to be as open-ended as possible. Its scope is indeed extended to all technologies that reduce greenhouse gases and improve energy efficiency.

Conclusion

The draft Guidelines sufficiently reveal the priority that the Commission reserves for this issue. Thus, they aim to create new categories of aid in line with the evolution of technology and society, including, for example, the fields of clean mobility and decarbonization.

It should also be noted that the airport sector, explicitly excluded from the current Guidelines, is now covered by the new project and will be able to benefit from aid for energy performance improvement or for green mobility. Airlines will also be able to take advantage for the energy improvement of their fleet.

Renewable energy communities, which have been growing in recent years, however, are not targeted, and therefore could not be subject to specific incentives.

In addition, the downward revision of the maximum aid intensity rates is unlikely to accelerate the hoped-for change in business investment.

The project can still be improved. This public consultation is an opportunity for everyone to make their voice heard on this fundamental issue!