Today’s proposal for a Temporary Crisis and Transition Framework aims to boost investments for a faster roll-out of renewable energies as well as to support the decarbonisation of the industry and the production of equipment necessary for the net-zero transition, while preserving the integrity and level playing field on the Single Market.
Proposed amendments
The Commission is consulting Member States on possible amendments aimed at:
- Further facilitating the roll-out of renewable energy and decarbonising the industry by including the possibility to: (i) support the deployment of all renewable energy sources; (ii) grant aid for less mature technologies, such as renewable hydrogen, without a competitive bidding, provided that certain safeguards to ensure the proportionality of public support are in place; and (iii) incentivise investments leading to a significant reduction of emissions by including higher aid ceilings and simplified aid calculations (as an example, the aid would simply be determined as a share of investment costs).
- Supporting investments in the production of strategic equipment necessary for the net-zero transition, in order to accelerate the transition to a net-zero economy and overcome the current energy crisis. In particular, the Commission is proposing to address the productive investment gap in sectors strategic for the green transition. This comes in the context of global challenges posing a threat of new investments in these sectors being diverted in favour of third countries outside Europe. In particular, the Commission proposes to allow support from Member States for the production of batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage as well as the related critical raw materials necessary for the production of such equipment. For projects that take place in disadvantaged regions in the EU (where the GDP per capita is below 75% of the EU average) or which involve an investment in several Member States, and for which support in third country is available, further proportionate aid would be allowed to match the level of support offered in third countries, up to what is necessary to enable the investment to be made in Europe.
These new provisions would be in place until 31 December 2025.
Member States now have the possibility to comment on the Commission’s draft proposal. The Commission intends to adopt the Temporary Crisis and Transition Framework in the coming weeks, taking into account the feedback received from the Member States.
Background
In the context of the Green Deal Industry Plan, the Commission has also recalled that it is in the process of revising the General Block Exemption Regulation (“GBER”), which enables Member States to directly implement aid measures, without having to notify them ex-ante to the Commission for approval. The revised GBER will be adopted in the coming weeks and will give Member States more flexibility to support measures in key sectors for the transition to a net-zero economy, such as hydrogen, carbon capture and storage, zero-emission vehicles and energy performance of buildings. In particular, the Commission intends to further increase notification thresholds for support for green investments, to enlarge the scope of investment aid for recharging and refuelling infrastructures, as well as to further facilitate SMEs training aid for skills.
Among others, the revision of the GBER will contribute to further streamline and simplify the roll-out Important Projects of Common European Interests (IPCEI), specifically in relation to the implementation of smaller, IPCEI-related, innovative projects. In addition, the Commission is working together with Member States on a code of good practices for a transparent, inclusive and faster design of IPCEIs. The code of good practice will be signed by the Commission and the Member States by spring this year.
The State aid Temporary Crisis Framework, adopted on 23 March 2022, enables Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine.
The Temporary Crisis Framework has been amended on 20 July 2022, to complement the Winter Preparedness Package and in line with the REPowerEU Plan objectives.
The Temporary Crisis Framework has been further amended on 28 October 2022 in line with the recent Regulation on an emergency intervention to address high energy prices (‘Regulation (EU) 2022/1854‘) and the Commission’s proposal on a new emergency regulation to address high gas prices in the EU and ensure security of supply this winter.
The Temporary Crisis Framework provides for the following types of aid, which can be granted by Member States:
- Limited amounts of aid, in any form, for companies affected by the current crisis or by the subsequent sanctions and countersanctions up to the increased amount of €250,000 and €300,000 in the agriculture, and fisheries and aquaculture sectors respectively, and up to €2 million in all other sectors;
- Liquidity support in form of State guarantees and subsidised loans: Member States may provide (i) subsidised State guarantees to ensure banks keep providing loans to all companies affected by the current crisis; and (ii) public and private loans with subsidised interest rates. For both kinds of support, there are limits regarding the maximum loan amount, which are based on the operating needs of a company, taking into account its turnover, energy costs or specific liquidity needs. The loans may relate to both investment and working capital needs. Specific flexibility is provided for energy companies that require financial collateral for trading activities.
- Aid to compensate for high energy prices. Member States may partially compensate companies, in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases. This support can be granted in any form, including direct grants. Member States may calculate support based on either past or present consumption, taking into account the need to keep intact market incentives to reduce energy consumption and to ensure the continuity of economic activities. In addition, Member States may provide support more flexibly, including to energy-intensive companies and to sectors subject to competitive pressure due to high levels of international trade, subject to safeguards to avoid overcompensation. For companies receiving larger aid amounts, the Temporary Crisis Framework foresees commitments to set a path towards reducing the carbon footprint of energy consumption and implementing energy efficiency measures.
- Measures accelerating the roll-out of renewable energy. Member States can set up schemes for investments in renewable energy, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field. In particular, Member States can devise schemes for a specific technology, requiring support in view of the particular national energy mix.
- Measures facilitating the decarbonisation of industrial processes. To further accelerate the diversification of energy supplies, Member States can support investments to phase out from 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. Member States can either (i) set up new tender-based schemes, or (ii) directly support projects, without tenders, with certain limits on the share of public support per investment. Specific top-up bonuses would be foreseen for small and medium-sized enterprises as well as for particularly energy efficient solutions.
- Measures aimed at supporting electricity demand reduction, in line with the EU Regulation on an emergency intervention to address high energy prices. This section provides Member States with the relevant tools to incentivise electricity demand reduction during peak times.
Sanctioned Russian-controlled entities are excluded from the scope of these measures.
The Temporary Crisis Framework, as currently in force, is applicable until 31 December 2023.
More information on the Temporary Crisis Framework and other actions taken by the Commission to address the economic impact of Russia’s war against Ukraine can be found here.
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Competitiveness in Europe cannot be built on State aid. But support may be needed to fulfil our objective to get rid of fossil fuels as quickly as possible. The decarbonisation of the EU industry could, temporarily, require an additional boost and incentives to stimulate and retain investments in strategic clean tech sectors in Europe. We will now seek Member States views before we decide on the way forward. And with a need to preserve cohesion and competition to safeguard a level playing field in the Single Market.
Statement by EU Commission President von der Leyen on the Green Deal Industrial Plan
Brussels, 1 February 2023
We just had in the College the adoption of the Communication on the Green Deal Industrial Plan. This Communication comes with the backdrop of the knowledge that we are living now in a decisive time – basically the decade that will decide on whether we are going to be successful in fighting climate change or not. And we know that, in the fight against climate change, what is most important is the net-zero industry. We want to seize this moment. We know that in the next years the shape of the net-zero economy and where it is located will be decided, and we want to be an important part of this net-zero industry that we need globally.
We have a very strong starting point as a European Union. You know that Europe is a leader on innovation and deployment of net-zero technologies. We have started three years ago, we were the first with the European Green Deal. We have cast our goals into law, we were also the first to do that. We have a detailed roadmap – that is Fit for 55. And from the very beginning, three years ago, we were very clear that we are convinced that the European Green Deal is our new growth strategy. I think I was 90 days in office, then the pandemic hit. This did not stop us. It is basically the contrary: We seized the crisis to move forward. You remember that we introduced NextGenerationEU. And in NextGenerationEU we have the Recovery and Resilience Facility, which consists of EUR 725 billion. We dedicated 37% of this RRF to the green transition. Actually, Member States even overshoot this target, they are now at 40%. So NextGenerationEU, due to the pandemic but with a clear focus on the green transition, was the first accelerator, if I may call it so, for our European Green Deal.
The second accelerator that we had was the Russian war of aggression and its triggering of the energy crisis. You recall that almost a year ago we were heavily dependent on Russian fossil fuels. Russia blackmailed us by threatening to cut the energy supply. Actually, they have cut 80% of pipeline gas in eight months only. We did not give in, we resisted. We decided to speed up the diversification away from Russian fossil fuels to other suppliers and, most importantly, to accelerate the investment in renewables. For that, we tabled REPowerEU in May last year. REPowerEU is focused on reducing demand, on increasing efficiency and, as I said, on accelerating the deployment and infrastructure of renewables. Actually, last year, we doubled the additional deployment of renewable energy. And for the very first time, we generated more electricity from renewables than from gas.
But this is only the beginning, because we now see the third accelerator in this story. We see that major economies are stepping up their investment in the net-zero industry – rightly so. If you look at Japan and the green transformation plans, they have now put forward EUR 140 billion through ‘green transition’ bonds. If you look at India, they have put forward the so-called Production Linked Incentive Scheme: massive investment in photovoltaics, massive investment in batteries. The UK, Canada and many others have also put forward their investment plans. And the United States has passed the Inflation Reduction Act. Let me be very clear on this one: We welcome this, this is good news. We have long since argued that the fight against climate change is a must. A must for our planet; a must for our economic prosperity; and a must for our strategic independence. We are competitive, we need competition. What we are looking at is that we have a level playing field in the global competition as well as a level playing field within the Single Market. This is so important for us.
Therefore, what are our next steps? The Communication that we present today has four pillars. First of all, a conducive regulatory environment for the net-zero industries; second, national and EU funding; third, ensuring proper skills for the green transition; and fourth, an ambitious trade agenda.
Let me have a look at the first pillar. We all know that to grow, our net-zero industries need the right framework: It has to be simpler; it has to be faster; and it has to be more predictable. We will therefore propose the Net-Zero Industry Act. It will focus on the key technologies for the shift to net zero. It will speed up permitting – this is one of the major complaints. When you speak to the net-zero industry, the major complaint is always the permitting processes. And it will incentivise multi-country projects. A big focus is on cutting red tape. And it will set targets for what we need until 2030. Because there is a simple equation: Only what gets measured gets done. We know that we need to secure the volumes needed for raw materials. For that, we will propose a Critical Raw Materials Act. Its aim is to facilitate the extracting, the processing but also the recycling in the European Union, and of course the search for substitutes. Then energy and electricity, as explained, is in particular – alongside the raw materials – the other core element our industry requires to be competitive. So in March, we will also come forward with the electricity market design because electricity users should be able to benefit from the low costs of renewables. This is the first pillar: the regulatory environment.
The next and second pillar is the funding. Here, we have at national level one instrument that is well-known, that is state aid, to promote investment in strategic sectors. We all know that the European Union already has a Temporary Crisis Framework in place since the beginning of Russia’s war on Ukraine. We will now further adapt it to the net-zero industry requirements. What is important: This adaptation has to be targeted and time-limited. After this press conference, Margrethe Vestager will present the adaptation for a public consultation that starts today on state aid. What is very important: If we look at state aid, we must be careful and avoid any kind of fragmentation of the Single Market. So the level playing field for the Single Market internally is as important as the level playing field we want globally.
Therefore, always, for me, if you have state aid, the other side of the coin has to be funding at the EU level. We need this first step of funding now, so we cannot wait too long, we need a bridging solution to future other financing instruments. But at the moment being, we need to work with what we have right now and focus it on the clean-tech industry. This means that we want to leverage the possibilities provided by REPowerEU, by InvestEU and by the Innovation Fund.
You recall that I said we proposed REPowerEU in May last year. It took quite a while until it was agreed, now it is up and running, it is ready to go. We initially proposed it to get rid of the dependency on Russian fossil fuels. And initially, we were discussing whether we would be able to do that until 2027 or earlier. You know now that we have completely got rid of our dependency on Russian fossil fuels. It went much faster than we expected. That is good so. So we have the possibility to redirect or reorient the additional funding of REPowerEU – it is about EUR 250 billion – to our net-zero industries. For this, we will enable and encourage the Member States to use the money from REPowerEU for example for tax breaks to the net-zero industry. Because then, this mirrors the speed, the predictability and the targeted way forward – as we see for example from competitors. It is fast, it is predictable, it is targeted.
The second element in these available funds is InvestEU. We will assess how funding could be increased. InvestEU has a different approach. REPowerEU goes to Member States with view on the net-zero industry. InvestEU looks at projects, it catalyses private investment through guarantees to the EIB and the national promotional banks. In other words, it eases the access to funding at crucial moments of new product developments for innovative projects, for pioneering companies, for state-of-the-art industries. So this is looking more at the company or the project level. The third element, also looking at projects is the Innovation Fund which will work with production subsidies for key technologies.
As I said, this is the bridging we need right now for a mid-term solution in the context of the review of the MFF during which we will propose to set up a European Sovereignty Fund. This European Sovereignty Fund is targeted at boosting resources available for upstream research, for innovation and for strategic industrial projects. This is the main element we are looking at, but it takes more time to develop it. That was the second pillar: funding.
The third pillar is about skills. We will only be successful in having a prosperous net-zero industry here in the European Union if there is enough skilled personnel. And you know that already today, companies are desperately looking for personnel. I am not only speaking about skilled personnel but also personnel more generally. Nearly 30% of businesses in the manufacturing electrical equipment sector for example say that they face labour shortages already right now. So the Green Deal Industrial Plan will focus on this topic. We have our Pact for Skills. We have the European Year of Skills. Just a few figures that show where we really have to get better: We have an impressively low unemployment employment rate at round about 6% on average in Europe – that is good. So the distribution is also different in the different Member States – but 6% on average. But if you look at specific groups, we see that youth unemployment is at 14%. What a waste of talent and opportunities. So we have to get better there. If you look at female participation in the labour market, it is at 69%. Male participation in the labour market is at 80%. So there, we can also get better with women accessing the labour market. This has to do with infrastructure and family policies, good schools, good childcare, but we can do something about it. And if you look at the older workers, the older employees – my age group, 60 to 64 years old – only 48% is participating in the labour workforce. Here too, what an amount of wisdom and experience that we are not using in our labour market. And the fourth element is migration: We have round about three million people migrating legally to the European Union, joining the labour market. This is an important topic.
The fourth pillar is about trade. We will work on our positive trade agenda. At the moment being, we are working to conclude agreements with Mexico, Chile, New Zealand and Australia. We are making progress with India and Indonesia. And we need to restart a conversation regarding the Mercosur agreement. Because we know we need international trade. It establishes supply chains, creates jobs and helps our industry to develop new products.
One last sentence on the way to go forward. This is the Communication we put forward. Then of course, we will have the political debate in the European Council on 9 February. And in view of the input that we get, we will then shape the legal proposals by mid-March, early enough to discuss that then during the regular European Council on 23 March.