res(2020)3900681 - 24/07/2020
Ref. Ares(2020)5071176 - 28/09/2020
14 July 2020, 17h30-18h00
State aid rules in relation to the green transition of industry
Implementing the European Green Deal will require steering significant amounts of public
and private capital towards sustainable investments to help decarbonise the economy and
create new jobs to replace those lost in carbon-intensive regions. The public sector alone
cannot cover all the investments required. State aid rules will enable Member States to
contribute to the Green Deal objectives by making the most efficient use of limited public
funds and by ensuring a level playing field on the EU single market.
Work is already ongoing to revise the Emission Trading System State aid Guidelines.
The State aid Guidelines for environmental protection and energy are being
evaluated as part of the Fitness Check of the 2014 State aid modernisation package and
their revision should also be launched soon.
The current Emission Trading System (ETS) State aid Guidelines expire on 31
December 2020. They allow Member States to compensate some energy-intensive users
for part of the higher electricity costs resulting from the EU Emissions Trading System (EU
ETS) in the period 2013-2020 and expected to be passed on to them by electricity
companies (“indirect emission costs”). The steel sector is currently eligible for
compensation under the existing ETS Guidelines and is also included in the list of
eligible sectors in the draft Guidelines for the period 2021-2030 which were published
for stakeholder feedback earlier this year. The revised ETS Guidelines for the period
2021-2030 are planned for adoption by the end of 2020.
As stated in the Green Deal, energy-intensive industries, such as steel, are
indispensable to Europe’s economy, as they supply several key value chains. The
Commission will support clean steel breakthrough technologies leading to a zero-
carbon steel making process by 2030.
In the context of the Green Deal, competition policy and State aid rules in
particular, have an important role to play
in supporting deep decarbonisation in the
industry. The objective of State aid control is to maximise environmental, social and
economic benefits from limited public funds by i) minimising decarbonisation costs for
the State, industry and consumers, ii) ensuring public money does not crowd out
private spending, and iii) contributing to a level playing field in the Single Market.
The Commission agrees that addressing the risk of carbon leakage is essential
complement the Green Deal policies. However, aid for indirect emission costs may
have a negative impact on the efficiency of the EU Emission Trading System. If poorly
targeted, the aid would relieve the beneficiaries of the cost of their indirect emissions,
thereby limiting incentives to reduce emissions and innovation in the sector.
Furthermore, such State aid may result in significant distortions of competition
the internal market, in particular when undertakings in the same sector are treated
differently across the Member States because of the different budgetary constraints.
As laid out in the Green Deal Communication, the relevant State aid rules (Emission
Trading System state aid guidelines
and the Energy and Environmental aid
) will be revised in order to support a cost-effective and socially-inclusive
transition to climate neutrality by 2050.
We will revise the rules to provide, on one hand, a clear, fully updated and fit-for-
in the industry in the context of the Green Deal.
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14 July 2020, 17h30-18h00
On the other hand, the revision of the rules will also aim to limit the distortions of
competition on the internal market
and to ensure a level playing field across the
While preparing for the new rules, the Commission acknowledges the renewed
ambitions of Member States to achieve their 2030 targets and the further
decarbonisation of the electricity sector and the economy by 2050. The current
for environmental protection and energy already allow support for
decarbonisation investments, including investments for carbon capture and
Will the Commission allow State aid to adjust the price of green electricity and
hydrogen to an internationally competitive level? This would provide a reliable and
viable cost basis for investment decisions in CO2-lean steel plants [based on
EUROFER’s “Green Deal on Steel” document]
The current Guidelines for environmental protection and energy contain rules applying
to environmental measures going beyond Union standards. These rules can already be
used for aid to transform to climate neutral production processes. As regards possible adjustments of the prices of green electricity and hydrogen
, or other new
proposals, the Commission will analyse them in the upcoming review of State aid
, or as part of a potential State aid notification, if notified by a Member State.
In the context of the ongoing COVID 19 crisis, the Commission should take into
account the difficulties that energy-intensive industries are and will be facing.
The Commission has taken important steps to ensure that the EU has the adequate
tools to address this major challenge. From the State aid point of view, the necessary
measures have been put in place to ensure that Member States could help those most
affected by the COVID-19 (i.e. the adoption of the Temporary Framework for State
measures to support the economy).
However, there are different reasons why a significantly more generous regime of
indirect cost compensation for energy-intensive users
does not appear to be the
most effective crisis response:
The Emission Trading System State aid Guidelines have a different objective than
the measures put in place in the context of the COVID-19 crisis, i.e. support
companies that are at significant risk of carbon leakage
due to their Emission
Trading System indirect costs.
The system of indirect cost compensation only concerns a relatively small part of
the overall economy.
Whilst the undertakings concerned are hit by the fall-out of
COVID-19, they are typically not the sectors suffering the greatest impact justifying
a policy response directed exclusively at them
As the COVID-19 crisis is of global scale, it does not significantly alter the dynamics
in terms of carbon leakage between Europe and other parts of the world.
In the contributions to the revision of the Emission Trading System State aid
, the Steel sector highlighted that the following elements should be particularly
taken into consideration in the revision process of the ETS guidelines:
eligibility of other sectors in the steel value chain that are not eligible under the
Commission proposal for draft guidelines (e.g. consumption of industrial gas, mining of
iron ores, and seamless pipes);
an aid intensity of 100% (compared to 75% in the draft guidelines);
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14 July 2020, 17h30-18h00
similar CO2 factors regions as in the current guidelines (in particular the Central West
Europe and Nordic);
a mid-term review of the efficiency benchmarks; and deleting the conditionality
requirements to the compensation.
The results of the evaluation of the Guidelines on State aid for environmental
protection and energy (EEAG)
undertaken in the context of the Fitness Check will inform
any potential revision of the Guidelines to accompany the new Green Deal. It will take into
account recent and new regulatory developments (i.e. the Clean Energy Package, Clean
Mobility Package and Circular Economy Package), technological progress and
opportunities (e.g. storage, hydrogen) as well as market evolutions in the energy sector
(e.g. higher market penetration of renewables, infrastructures) and in other areas (e.g. low
emission mobility, electrification of the industry).
What the existing rules already allow
: already under the current framework, Member
States can continue to use to a maximum extent all the possibilities provided under the
Environmental and Energy State Aid Guidelines (EEAG) to achieve their 2030 targets and
the further decarbonisation of the electricity sector and the economy by 2050. These
existing rules already facilitate many green initiatives, including support for renewable
energy or schemes promoting circular economy Similarly, Member States can continue to
rely on existing State aid rules to alleviate the social and regional consequences
decarbonisation measures. For example, they can choose to support workers affected by
the closure of uncompetitive coal mines, invest in SMEs and start-ups, or in the up- and
reskilling of workers.
Environmental aid to transform to climate neutral production processes
sometimes referred to as aid for decarbonisation or aid for energy efficiency) can be
granted under the Environmental and Energy State Aid Guidelines (EEAG) provided that
economic incentives do not already warrant the investment concerned and the companies
reduce their impact on the environment beyond Union standards or ETS benchmarks
In addition, aid should remain limited to what is necessary to achieve the additional
Practical application of the current Environmental and Energy State Aid Guidelines
In addition, pending the revision of the State aid Guidelines for environmental protection
and energy, the Communication on the Green Deal Investment Plan explains for a
number of areas how the Commission intends to apply the current rules in order to
support decarbonisation, including aid to transform to climate neutral production
For key enabling technologies and breakthrough innovation
necessary for Green
Deal objectives, Member States can pool their funds to unlock significant private
investments to make important projects of common European interest (IPCEIs)
reality – including in the regions most affected by the green transition. In addition, Member
States can also grant support for research development and innovation.
State aid rules are applicable to the future Just Transition Fund (“the Fund”
Fund aims to offer tailored support to the people and regions most affected by the
transformation required to achieve carbon neutrality by 2050. It is planned to be
implemented as part of cohesion policy. As clarified in the current proposed Regulation,
the Fund interventions will be subject to State aid rules
Electronically signed on 28/09/2020 13:43 (UTC+02) in accordance with article 11 of Commission Decision C(2020) 4482
Topics for discussion