State aid: Commission publishes results of evaluation of EU State aid rules

The European Commission has published a Commission Staff Working Document summarising the results of an evaluation of the State aid rules adopted as part of the State Aid Modernisation package. The evaluation concludes that, overall, the State aid control system and rules are fit for purpose. However, individual rules will need some adaptation, also in the light of the recent European Green Deal and the EU’s Industrial and Digital Strategies.

As part of the Commission’s ongoing review of competition rules to ensure they are fit for the changing market environment, the evaluation of these State aid rules was launched in January 2019. The assessment took the form of a “fitness check”, involving internal analyses by the Commission and public consultations as well as, in some cases, studies prepared by external consultants or targeted consultations of specific stakeholders. The exercise covered the following rules, which were adopted as part of the State Aid Modernisation:

• General Block Exemption Regulation (GBER)
• De minimis Regulation
• Guidelines on regional State aid
• Framework for State aid for research and development and innovation (RDI)
• Communication on important projects of common European interest (IPCEI)
• Guidelines on State aid to promote risk finance investments
• Guidelines on State aid to airports and airlines
• Guidelines on State aid for environmental protection and energy
• Guidelines on State aid for rescuing and restructuring

In addition, it also covered the Railways Guidelines from 2008 and the Short term export credit Communication from 2012. Those rules were not revised as part of the State Aid Modernisation, but an evaluation was relevant in the light of developments in EU law and the Commission’s case practice. 

The “fitness check” concludes that, overall, the State aid rules under scrutiny are broadly fit for purpose.

However, the individual rules need revisions, including clarifications, further streamlining and simplification, as well as adjustments to reflect recent legislative developments, current priorities, changes in markets and technology developments.

By way of example, in line with the outcome of the evaluation, the Commission will propose to clarify and simplify the practical application of certain provisions, such as how to calculate in a simplified manner indirect eligible costs for research & Development projects. As regards IPCEIs, in view of the special role that SMEs play in the EU economy, and considering that State aid to SMEs is less likely to distort competition and affect trade between Member States, it may be appropriate to facilitate SMEs’ participation in IPCEIs, both directly and indirectly. The “fitness check” also revealed that compatibility rules on regional aid worked well, but needed streamlining and clarification of some concepts. This has already been reflected in the proposed draft Regional aid Guidelines rules published for consultation in July 2020. The “fitness check” shows that the environmental and energy rules have so far facilitated a more effective and less distortive deployment of State resources to improve environmental protection and achieve the objectives of the Energy Union. However, they need to be further adjusted in light of new technologies and novel support types, as well as recent environmental and energy legislation.

The rules also need to be aligned to future challenges, in line with the Commission’s priorities. In particular, State aid can, and should, contribute even further to the European Green Deal, as well as to the EU’s Digital and Industrial Strategies. In particular, the revision of the energy and environmental rules will have to facilitate appropriate measures further promoting a modern decarbonised and circular economy, while ensuring limited distortions of competition and adequate safeguards to the integrity of the single market. This is key, given the past and, most crucially, future budgetary constraints combined with the necessity to support the recovery of the EU economy in the aftermath of the coronavirus crisis.

As State aid rules are a vital part of the green transition, in line with the Commission Communication on the European Green Deal and the results of the “fitness check”, the Commission plans to anticipate the review of the relevant State aid guidelines to the end of 2021. These include the Regional aid Guidelines, IPCEI Communication, RDI Framework, Risk Finance Guidelines, Environmental and Energy Guidelines and relevant provisions of GBER. The other rules that were part of the “fitness check” will be revised in the medium term. Public consultations on these rules are taking place between the second half of 2020 and the beginning of 2021.

Background

Since May 2012, the Commission has implemented a major reform of EU State aid rules: the State Aid Modernisation. This allows Member States to quickly implement State aid that fosters investment, economic growth and job creation, leaving the Commission to focus its State aid control on cases most liable to distort competition. As part of the State Aid Modernisation, the Commission has revised a considerable number of State aid rules since 2013.

Nine of these rules adopted as part of the State Aid Modernisation were due to expire by the end of 2020 (while others have no fixed expiry date). To provide predictability and legal certainty, whilst preparing for a possible future update of the rules , the Commission has prolonged in a Regulation and a Communication the validity of these State aid rules until the end of 2021 or until the end of 2023.