Revised EU state aids rules in view

Companies would have to exceed EU environmental norms to receive funding, draft shows

The European Commission is set to propose a significant strengthening of rules governing national support to industry for environmental purposes, ENDS Daily has learned. New EU guidelines on state aids for environmental protection will also broaden the definition of environmental aids to include exemptions from ecotaxes and support for renewable energy. The proposals, which are expected to be formally released by the Commission in June, will revise existing guidelines agreed in 1994.

According to a draft seen by ENDS Daily, financial assistance to businesses to improve environmental standards will no longer be permitted if the aim is simply to meet EU environmental norms. Aid will only be approved, instead, if the goal is to exceed these standards.

"The Commission believes that state aids are no longer justified for investments aimed simply at achieving conformity with new or existing [EU] legislation," according to the draft. "State aids can no longer make up for the absence of internalisation of costs."

Governments would generally be able to fund up to 30% of "eligible costs" of environmental investments - those which enable companies to exceed EU pollution control norms. Small and medium sized businesses would be able to claim 40%; those in areas eligible for EU regional aid could get even more.

Investments in "priority" renewable energy sources - photovoltaics, biomass and some types of wind - would be eligible for 40% state aid. Aid for investments in cogeneration and contaminated land reclamation would fall under the special "environmental" rules, but money paid to help industry relocate, even if done for environmental reasons, would not.

The Commission says it is "not favourable" to state aid for operational costs of industry, but says it could be authorised in "specific cases". Notably, it says, governments could fund operational costs which "ensure the launch of new products or services significantly less polluting, but whose costs are currently and markedly higher than costs of traditional products."

Under the rules, exemptions from or rebates on ecological taxes would only be allowed if companies were still paying a rate equivalent to EU minimum tax levels. The concession would, in any case, have to be phased out after five years, although restricted exemptions would be possible for energy-intensive industries.

State aids for renewable energy producers' running costs would be allowed "in view of the difficulties encountered by these energies in competing effectively with traditional energies". Governments could provide subsidies, but in amounts not exceeding the difference between the market price of energy and the actual costs of production and only for five years.

Follow Up:
European Commission, tel: +32 2 299 1111.

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