Revised State Aid Guidelines for Environmental Protection

The European Commission revised state aid guidelines for environmental protection in April 2008, to ensure that member states were able to provide incentives necessary to meet the various proposed energy- and climate change-related targets. Control of state aid by the Commission is designed to ensure that state aid measures will result in a higher level of environmental protection than would occur without the aid, and to ensure that the positive effects of the aid outweigh its negative effects in terms of distortions of competition, taking account of the polluter pays principle (PPP) established by Article 174 of the EC Treaty. The revisions are intended to allow member states to support the production of renewable energy and energy efficient cogeneration by granting operating aid that covers the full difference between production costs and market prices. The new guidelines, including those dealing with tax exemptions, are meant to provide certainty to emissions trading schemes and to open the possibility of state aid to carbon dioxide capture and storage (CCS). The primary revisions from the 2001 guidelines are as follows: There are new provisions, for example aid for: early adaptation to standards, environmental studies, cogeneration and district heating, energy-saving investments, renewable energy sources, waste management and aid involved in tradable permit schemes. Provisions also cover reductions in or exemption from environmental taxes. Aid can also be granted for measures taken that go beyond European Community standards, or taken in the absence of any standards; this also applies to new transport vehicles. Various conditions for each of these provisions are detailed in the guidelines. Aid intensities have increased. The intensities for large enterprises have gone from a range of 30%-40% to 50%-60%. For small enterprises the intensities have gone from 50%-60% to 70%-80%. Furthermore, where an investment to improve on Community Standards or improve the level of environmental protection in the absence of standards involves eco-innovation, a further 10% aid bonus may be granted. In addition, a possibility to grant 100% following a competitive procedure has been introduced. There is no longer a bonus for aid to assisted regions or for renewable energy installations serving all needs in an entire community. The guidelines maintain the possibility of long term derogations from environmental taxes without conditions as long as after reduction, the companies concerned pay at least the Community minimum. Where the companies do not pay at least the Community minimum, long term derogations remain possible but the state must demonstrate that these derogations are necessary and proportionate. The guidelines are split into a standard assessment and a detailed assessment. A detailed assessment method for large aid amounts to individual enterprises has been introduced to allow for a deeper scrutiny of the individual cases which have the greatest potential to distort competition and trade. Schemes involving tax exemptions and reductions will only be assessed at the level of the scheme, i.e. individual enterprises will not be subject to a detailed assessment. The new guidelines are also related to a new general block exemption for seeking state aid approval by member states. The block exemption will relieve the member states from the obligation to notify certain aid measures to the Commission, so as to reduce the associated administrative burden. It is foreseen that certain types of environmental aid under a certain amount will not have be notified to the Commission in the future. In addition, it is foreseen that under the block exemption a simplified method can be used to calculate the aid amount. In addition, more detailed reporting and recording measures are to be undertaken by the member states. These must now being amending their state aid schemes, where necessary, to bring them in line with the new guidelines. Finally, by strik

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