The European Commission has approved a €2.5 billion (60 billion CZK) Czech scheme to help manufacturing companies to decarbonise their production processes and improve their energy efficiency to foster the transition to a net-zero economy, in line with the Green Deal Industrial Plan. The scheme was approved under the State aid Temporary Crisis and Transition Framework, adopted by the Commission on 9 March 2023 to support measures in industrial sectors which are key to accelerate the green transition and reduce fossil fuel dependencies. The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022 to enable Member States to support the economy in the context of the current geopolitical crisis, already amended on 20 July 2022 and on 28 October 2022.
The Czech scheme
Czechia notified to the Commission, under the Temporary Crisis and Transition Framework, a €2.5 billion (60 billion CZK) scheme to support companies subject to the EU ETS to further accelerate their green transition.
Under this scheme, which will be fully funded through the EU Modernisation Fund, the aid will take the form of direct grants.
The scheme will be open to companies active in sectors subject to the EU ETS, including energy-intensive industries, such as refineries and companies active in the production of heavy metals, construction materials and chemical products.
The purpose of the scheme is to help these industries to reduce greenhouse gas emissions from their production processes by at least 40% and their energy consumption by at least 20% compared to today.
In order to be eligible, companies aiming to reduce greenhouse gas emissions need to either electrify their production processes or switch from the use of fossil fuels to renewable hydrogen or renewable hydrogen-derived fuels.
The Commission found that the Czech scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework. In particular, the aid (i) per beneficiary will not exceed either €200 million or 10% of the total budget of the scheme, except for projects concerning refining activities and manufacturing of basic metals, for which Czechia demonstrated that individual amounts up to 20% of the total budget of the scheme may be necessary; (ii) will not exceed the aid intensities set out in the Temporary Crisis and Transition Framework; and (iii) will be granted no later than 31 December 2025.
In addition, the aid is subject to conditions to limit undue distortions of competition, including safeguards for very successful projects generating extra net revenues or reducing costs compared to projections, where the beneficiaries will return part of the aid received to Czechia under a claw-back mechanism. Furthermore, beneficiaries will not be able to increase their production capacity beyond 2%.
The Commission concluded that the Czech scheme is 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 REPower EU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.
On this basis, the Commission approved the aid measure under EU State aid rules.
Background
On 9 March 2023, the Commission adopted a new Temporary Crisis and Transition Framework 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. Together with the amendment to the General Block Exemption Regulation (‘GBER’) that the Commission endorsed on the same day, the Temporary Crisis and Transition Framework will help speeding up investment and financing for clean tech production in Europe. It will also assist Member States in delivering on specific projects under National Recovery and Resilience Plans which fall within their scope.
The new Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022, to enable 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 Safe gas for a Safe Winter 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 Regulation on an emergency intervention to address high energy prices and the Regulation enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders.
The Temporary Crisis and Transition 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. In exceptional cases and subject to strict safeguards, Member States may provide to energy utilities for their trading activities public guarantees exceeding 90% coverage, where they are provided as unfunded financial collateral to central counterparties or clearing members.
- Aid to compensate for high energy prices. The aid, which can be granted in any form, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases. The individual aid amount may be calculated based on either past or present consumption, taking into account the need to keep market incentives to reduce energy consumption and to ensure the continuity of economic activities. In addition, Member States may provide support flexibly, including to particularly affected energy-intensive sectors, subject to safeguards to avoid overcompensation and to incentivise the reduction of the carbon footprint in case of aid amounts above €50 million. Member States are also invited to consider, in a non-discriminatory way, setting up requirements related to environmental protection or security of supply. Further details on the support possibilities for high energy prices, including on the methodology to calculate individual aid amounts, are available here;
- Measures accelerating the rollout of renewable energy. Member States can set up schemes for investments in all renewable energy sources, 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. The conditions for the granting of aid to small projects and less mature technologies, such as renewable hydrogen, have been simplified by lifting the need for a competitive bidding process, subject to certain safeguards;
- 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, with expanded possibilities to support the decarbonisation of industrial processes switching to hydrogen-derived fuels. 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. In the absence of tenders, a further simpler method has been introduced to determine the level of maximum support; and
- Measures aimed at supporting electricity demand reduction, in line with the Regulation on an emergency intervention to address high energy prices.
- Measures to further accelerate investments in key sectors for the transition towards a net-zero economy, enabling 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. More specifically, Member States may design simple and effective schemes, providing support capped at a certain percentage of the investment costs up to specific nominal amounts, depending on the location of the investment and the size of the beneficiary, with higher support possible for small and medium-sized enterprises (‘SMEs’) 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. More information on the support possibilities for measures to accelerate the transition to a net-zero economy can be found here.
Sanctioned Russian-controlled entities will be excluded from the scope of these measures.
Measures particularly important to accelerate the green transition and reduce fuel dependencies will be in place until 31 December 2025. This concerns in particular measures accelerating the rollout of renewable energy and energy storage, measures facilitating the decarbonisation of industrial processes and measures to further accelerate investments in key sectors for the transition towards a net-zero economy.
The remaining provisions of the Temporary Crisis Framework aimed at providing a more immediate crisis response (limited amounts of aid, liquidity support in form of State guarantees and subsidised loans, aid to compensate for high energy prices, measures aimed at supporting electricity demand reduction), remain applicable until 31 December 2023. With a view to ensuring legal certainty, the Commission will assess at a later stage the potential need for an extension.
The Temporary Crisis and Transition Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.
The non-confidential version of the decision will be made available under the case number SA.109055 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
More information on the Temporary Crisis and Transition Framework and other actions taken by the Commission to address the economic impact of Russia’s war against Ukraine and foster the transition towards a net-zero economy can be found here.
Quotes
This €2.5 billion scheme will help Czech industries to significantly decarbonise their industrial processes and achieve greater energy efficiency. The measure will also help Czechia reduce its dependence on imported fossil fuels, in line with the REPowerEU Plan, while ensuring that any potential competition distortions are kept to the minimum.