Sat. Feb 4th, 2023

Brussels, 10 October 2022

The European Commission has approved, under EU State aid rules, two Slovak schemes with a total budget of over €1.1 billion to help companies subject to the EU Emission Trading System (‘ETS’) decarbonise their production processes and improve their energy efficiency. The schemes will be made available in part through the Recovery and Resilience Facility (‘RRF’) and in part through the EU Modernisation Fund. The measure contributes to the achievement of the European Green Deal targets, while helping reduce dependence on imported Russian fossil fuels and fast-forward the green transition, in line with the REPowerEU Plan.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said:

These €1.1 billion schemes will help Slovak industries to decarbonise their industrial processes and achieve greater energy efficiency. The measures will also help Slovakia reduce its dependence on imported fossil fuels, in line with the REPowerEU Plan, while ensuring that any potential competition distortions are kept to the minimum.”

The Slovak schemes

The two schemes notified by Slovakia, with a total budget of over €1.1 billion, will be partially funded through the RRF, following the Commission’s positive assessment of the Slovak Recovery and Resilience Plan and its adoption by the Council. In particular, the €357.4 million relating to the first measure will be financed by the RRF and the €750 million relating to the second measure will be covered by the EU Modernisation Fund.

The schemes aim to help certain industries to reduce carbon dioxide (‘CO2‘) emissions in their production processes as well as to implement energy efficiency measures in industrial installations. The measures supported under the schemes range from electrification projects to the installation of industrial waste heat recovery technologies.

The beneficiaries of the measures will be companies active in sectors subject to the EU ETS, which include, among others, energy-intensive industries (i.e. refineries, steel works, and companies active in the production of heavy metals, construction and chemical products).

The projects that will benefit from the aid will be selected based through an open competitive bidding process and will be ranked on the basis of two criteria: (i) the lowest amount of aid requested per ton of CO2 emissions avoided, and (ii) the highest contribution to the achievement of the overall CO2 emission reduction objective of the schemes. Under the measures, the aid will take the form of grants based on the bids (i.e. the aid requested per CO2 emission abated) and limited to the project’s total investment costs. Projects will be selected following five tenders in total, the first of which is scheduled for 2022 and the last of which is planned for 2028.

The schemes are expected to avoid the release of 5.233 million tons of CO2 annually. This represents more than 12% of Slovakia’s 2030 target (i.e. 40 million tons of CO2 equivalent reduction compared to 1990).

The Commission’s assessment

The Commission assessed the schemes under EU State aid rules, in particular Article 107 (3) (c) of the Treaty on the Functioning of the European Union, which enables EU countries to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’), which allow Member States to support measures reducing or removing CO2emissions.

The Commission found that:

  • The schemes are necessary and appropriate to support decarbonisation and energy efficiency projects in sectors covered by the ETS.
  • The schemes have an “incentive effect” as the beneficiaries would not carry out the investments in decarbonisation and energy efficiency to the same extent without the public support.
  • The schemes have a limited impact on competition and trade within the EU. In particular, the aid is necessary and appropriate for Slovakia to contribute to the European and national environmental targets. In addition, it is proportionate and any negative effect on competition and trade in the EU will be limited in view of the design of the bidding process, which will ensure that the amount of aid is kept to the minimum.
  • Finally, Slovakia committed to ensure that the aid delivers overall CO2 reductions and that it does not merely displace the emissions from one sector to another, in particular when it comes to electrification projects, which can entail significant indirect greenhouse gas emissions. In this regard, Slovakia plans to increase the share of low carbon electricity in the national electricity mix.  Moreover, the two schemes will be subject to a common ex-post evaluation, for which Slovakia submitted a plan. The evaluation will include verification of: (i) the transition of the Slovak electricity mix towards decarbonised electricity; and (ii) the effectiveness of the competitive bidding process.

On this basis, the Commission approved the measure under EU State aid rules.

Background

The Commission’s 2022 CEEAG provide guidance on how the Commission assesses the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

The new guidelines, applicable as from January 2022, create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection. They include sections on energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply, subject to certain conditions.

The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the RRF as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans, to facilitate the rapid deployment of the RRF.

The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The EU ETS is a cornerstone of the EU’s policy to combat climate change and a key tool for curbing greenhouse gas emissions cost-effectively. On 30 June 2021, the European Parliament and the Council adopted the European Climate Law endorsing the binding target to cut emissions by at least 55% by 2030, compared to 1990 levels.

More information will be made available under the case numbers SA.102385 (for the RRP scheme) and SA.102388 (for the Modernization Fund scheme) in the State Aid Register on the DG competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

Source – EU Commission

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