Commission approves €520 million Luxembourgish State aid schemes to foster the transition to a net-zero economy
The European Commission has approved two Luxembourgish schemes with a total budget of €520 million to help manufacturing companies to decarbonise their production processes and to support investments in strategic sectors to foster the transition to a net-zero economy. The schemes were approved under the State aid Temporary Crisis and Transition Framework (‘TCTF’) adopted by the Commission on 9 March 2023 and amended on 20 November 2023 and on 2 May 2024.
The Luxembourgish measures
Luxembourg notified to the Commission, under the TCTF, two schemes with a total budget of €520 million to (i) support the decarbonisation of industrial production processes (‘decarbonisation scheme’) and (ii) accelerate investments for the production of relevant equipment necessary to foster the transition to a net zero economy (‘scheme for investments in strategic sectors’). Under both schemes the aid will take the form of direct grants.
The decarbonisation scheme is open to companies active in the manufacturing sector currently relying on fossil fuels. To be eligible, projects must allow to reduce the greenhouse gas emissions of the industrial installations concerned by at least 40% compared to the situation before the aid by means of electrification of their production processes.
The projects supported under the decarbonisation scheme will be selected through a competitive bidding process. Applications will be ranked based on the aid amount requested per tonne of greenhouse gas emissions avoided. Those projects requesting the lowest aid amount will be ranked higher, thus ensuring that aid is granted to the most efficient projects. The budget of the decarbonisation scheme is €500 million.
The scheme for investments in strategic sectors will support investments for the production of batteries, solar panels, wind turbines, heat-pumps, electrolysers, equipment for carbon capture usage and storage, as well as key components designed and primarily used as direct input for the production of such equipment or related critical raw materials necessary for their production. The budget of the scheme for investments in strategic sectors is €20 million.
The Commission found that the Luxembourgish schemes are in line with the conditions set out in the TCTF. In particular, the aid under the decarbonisation scheme will (i) not exceed €200 million per beneficiary; and (ii) be granted under the condition that the project must be completed within 36 months. Furthermore, the aid under the scheme for investments in strategic sectors will (i) incentivise the production of relevant equipment for the transition towards a net-zero economy; (ii) will respect the maximum aid ceilings; and (iii) will be granted no later than 31 December 2025.
The Commission concluded that the Luxembourgish schemes are necessary, appropriate and proportionate to accelerate the green transition and facilitate the development of certain economic activities, which are of importance for the implementation of the REPowerEU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) Treaty on the Functioning of the European Union and the conditions set out in the TCTF.
On this basis, the Commission approved the aid measures under EU State aid rules.
Background
On 9 March 2023, the Commission adopted the TCTF to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan.
The TCTF provides for the following types of aid, which can be granted by Member States until 31 December 2025 in order to accelerate the green transition:
- Measures accelerating the rollout of renewable energy (section 2.5). Member States can set up schemes for investments in all renewable energy sources, with simplified tender procedures.
- Measures facilitating the decarbonisation of industrial processes (section 2.6). Member States can support investments in the decarbonisation of industrial activities with a view to reduce dependency on imported fossil fuels, in particular through electrification, energy efficiency and the switch to the use of renewable and electricity-based hydrogen which complies with certain conditions, with expanded possibilities to support the decarbonisation of industrial processes switching to hydrogen-derived fuels.
- Measures to further accelerate investments in key sectors for the transition towards a net-zero economy (section 2.8). Member States can grant investment support for the manufacturing of strategic equipment (namely batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage), as well as for production of key components and for production and recycling of related critical raw materials. Support is capped at a certain percentage of the investment costs up to specific amounts, depending on the location of the investment and the size of the beneficiary. Higher support is possible for small and medium-sized companies, as well as companies located in disadvantaged regions to ensure that cohesion objectives are duly taken into account. Furthermore, in exceptional cases, Member States may provide higher support to individual companies, where there is a real risk of investments being diverted away from Europe, subject to a number of safeguards.
