The EU is driving forward the green transformation of the economy. The Clean Industrial Deal (CID) aims to reduce energy prices and promote the expansion of clean energy and sustainable production to boost competitiveness and climate neutrality. Europe’s industry is to play a leading role in the transition to climate-friendly, resilient and sustainable production, while remaining competitive in the international subsidy race, particularly against the US and China.
The European Commission recently presented a new state aid framework, the Clean Industrial Deal State Aid Framework (CISAF). CISAF is intended to enable Member States to make investments in clean technologies, renewable energies and the decarbonisation of industry more quickly and in a more targeted manner. CISAF replaces the previously applicable Temporary Crisis and Transition Framework (TCTF) and supplements the existing guidelines for climate, environmental protection and energy aid (KUEBLL). In doing so, the EU Commission – as already done by the German government within the framework of the Special Fund for Infrastructure and Climate Protection (see also our article) – is focusing, among other things, on strengthening public-private partnerships.
New state aid framework
CISAF provides the state aid framework for Member States’ support programmes. In terms of support practice, this means that
- Support programmes are possible: Member States may impose support programmes within the state aid limits of CISAF. The European Commission has announced that it will speed up its state aid assessment in such cases and make a decision within four to six weeks.
- Tax incentives: Member States can introduce tax credits, tax breaks, accelerated depreciation or immediate write-offs to support or relieve certain companies or sectors of the economy.
How can companies benefit?
Specifically, CISAF enables Member States to provide relief or support to companies in the following areas:
- Accelerating the expansion of clean energy: Subsidies for the transformation of energy production are possible. This should accelerate and facilitate the expansion of renewable energies and low-carbon energy sources. In addition, investments in low-carbon energy sources should be enabled and renewable hydrogen should be expanded as a technology of the future. To better compensate for weather-related fluctuations in renewable energy generation, investments in flexibility sources, i.e. storage and capacity mechanisms for sustainable energy, are also to be promoted. State aid for the above-mentioned projects is not tied to any specific form and can be granted, for example, as a direct subsidy or tax relief. The subsidy can cover the entire investment costs.
- Reducing electricity costs for energy-intensive users: To cushion high electricity prices and relieve the burden on energy-intensive industries, CISAF also allows for an industrial electricity price. You can find out more about the “industrial electricity price” in our article on this topic.
- Decarbonisation of industry: Subsidies, repayable advances, loans, guarantees or tax breaks can also be used to promote investments aimed at reducing greenhouse gases or energy consumption in industrial activities. This includes large-scale production in industrial plants. Support can be provided for investments in all technologies that contribute to decarbonisation. However, it is important to note that the investments may only be used to convert production capacities and not to expand them. The amount of aid can be up to EUR 200 million.
- Production capacity for clean technologies: Investments in the creation of production capacity for clean technologies can also be supported. CISAF defines clean technologies as batteries, heat pumps, solar, hydrogen and similar technologies. A detailed list of technologies can be found in Annex II of CISAF. Support can be provided for the manufacture of these technologies, the manufacture of important components for the technologies, or the manufacture of new or recovered critical raw materials for the technologies. Depending on the support area and the size of the company, support under an aid programme may cover up to 55% of eligible costs and amount to up to EUR 350 million. To receive funding, the beneficiary must bear at least 25% of the eligible costs themselves and guarantee to maintain the funded site for at least five years (or three years for SMEs). In addition, individual aid may be granted. The amount is limited either to the amount that the beneficiary would receive for an equivalent investment outside the EEA or to the financing gap, i.e. the amount necessary as an incentive to make the investment in the EEA rather than outside it. Accelerated depreciation is also allowed as an incentive for the purchase or leasing of clean technology equipment.
- Incentives for private investment: Private capital is to be mobilised in a targeted manner through incentives. In particular, Member States should be able to invest in public-private partnerships together with private investors, thereby securing the investment through aid in the form of guarantees or equity capital. The aid may not exceed EUR 250 million or 25% of the investment amount.
Outlook
CISAF creates a state aid framework for promoting transformation in the EU. However, it remains to be seen how the individual points of the CISAF will be transposed into national law and how the funds will be distributed among the various options. Regardless of this, the recipient of the aid must ensure that they do not violate any eligibility requirements. The principle of state aid law that aid must be repaid in the event of violations of eligibility requirements or earmarking remains in place.
Support from Taylor Wessing
Taylor Wessing offers custom-made legal advice, particularly in the areas of EU state aid law, energy law and the implementation of public-private partnerships. We can assist you with the legal structuring of your funding project, from the application stage to the verification of the use of funds.
