State aid

Europe expands state aid possibilities (Clean Industrial Deal)

The European Commission has introduced new plans to strengthen the European economy: the Clean Industrial Deal. A part of the European strategy is a new framework for state aid. The new state aid framework is known as the Clean Industrial State Aid Framework (CISAF). The framework provides national, provincial, and municipal governments with broader opportunities to invest in clean technologies, renewable energy, and the decarbonisation of industry. Below are the main components of the CISAF described.

Objectives of the Clean Industrial Deal

The state aid framework is part of the Clean Industrial Deal, aimed at making European industry more competitive and sustainable. The main objectives of the Clean Industrial Deal are:

Ensuring a stable and affordable energy supply.
Encouraging the demand for and supply of clean and environmentally friendly products.
Promoting public and private investments to support the transition to a clean economy.
Strengthening the circular economy and promoting the reuse and recycling of materials to reduce waste and use resources more efficiently.
Enhancing cooperation with international partners to achieve global environmental goals.
Ensuring skills and quality jobs for social justice.

Ensuring sufficient public and private financing

To achieve the ambitious goals of the Clean Industrial Deal, significant investments are needed. Financing must, for a large part, come from private parties. Public means may be needed to accelerate projects or provide investment certainty to companies. A government has various ways to finance projects. A government can invest together with private investors on market terms. Another option is for a government to choose other financial instruments, such as subsidies, loans, or guarantees. A government can also stimulate sustainable projects with tax benefits. If a government provides a selective advantage to a company through financing, it must comply with European state aid rules. With the CISAF, the European Commission expands the existing possibilities for granting state aid.

Overview of the projects

The new state aid framework of CISAF includes a list of project categories for which the European Commission expands state aid possibilities. Below is a brief description of these categories:

Acceleration of renewable energy

Governments can stimulate the production of energy from renewable sources, such as solar energy, wind energy, and biogas. Governments can also promote the production of renewable fuels of non-biological origin (RFNBOs). The condition is that the projects must be completed within 36 months. The government must include a penalty clause for if a project is not completed on time.
Governments can also invest in the storage of RFNBOs, biofuels, biogases, and sustainable fuels, electricity, and thermal energy. A government can provide up to 45% investment support to accelerate sustainable energy projects. Operating support is also possible for sustainable energy projects. However, the government must then ensure that the company pays back potential profits to the government. This is known as a 'contract for difference'.

Support for non-fossil flexibility

Governments can support flexibility in the electricity market, such as energy storage or encouraging demand response. By supporting such projects, a government can ensure more stability in the electricity grid. A condition is that the government provides support via a sort of tender method.

Capacity mechanisms

Support is possible for capacity mechanisms that contribute to better security of the energy supply. The Government can provide financial resources to producers who maintain and offer a certain capacity during times when there is an insufficient energy supply.

Decarbonisation of the industry

Governments can finance projects that lead to a reduction in greenhouse gas emissions or a significant reduction in energy consumption in the industry. This can include investments in energy savings and the electrification of industrial processes. In the decarbonisation of industrial heat, a government should prioritize direct electrification and the use of renewable heat. Under certain conditions, it is possible to provide resources for projects to use hydrogen or biomass.

Production capacity for clean technology

There are support possibilities for investments in the production of equipment which are essential for the transition to a zero-emission economy, such as batteries, solar panels, wind turbines, electrolysers, and equipment for the storage of Co2. A government can choose to finance the production or recovery of critical raw materials as far as these projects are necessary for the production of clean technologies