Industrial decarbonisation: EU Commission approves French state aid scheme

The French scheme

The scheme is aimed at helping the French industry reduce carbon dioxide (‘CO₂‘) emissions in their production processes thanks to technologies, such as electrification, carbon capture and storage (‘CCS’), carbon capture and use (‘CCU’), and energy efficiency measures.

The beneficiaries will be companies active in sectors subject to the EU ETS, such as the chemistry, metals, building materials and agri-food sectors. To be eligible, projects must be carried out at existing industrial sites and enable a decrease of the installations’ carbon footprint below the applicable ETS benchmark values.

The projects, which will benefit from the aid, will be selected through an open competitive bidding process and will be ranked on the basis of the lowest aid amount requested per tonne of CO₂ emissions avoided. Projects that achieve the highest CO₂ emission reductions compared to the applicable ETS benchmarks will be awarded a bonus in the ranking, as will highly innovative projects which have been selected under the EU Innovation Fund.

Under the scheme, the aid will take the form of annual grants over a 15-year period. Each year, beneficiaries will receive a payment based on the actual emissions avoided covering the extra costs associated with implementing and operating more environmentally friendly production processes compared to conventional methods.

The scheme is expected to bring over 60 million tonnes of CO₂-equivalent savings over its 15-year duration.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU, which enables Member States to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’), which allow Member States to support measures reducing or removing CO₂ emissions.

The Commission found that the scheme is designed to ensure that the aid delivers overall CO₂ reductions and that it does not merely displace the emissions from one sector to another, through requiring that all applicant projects enable a decrease in both direct and indirect emissions. In addition, according to France’s projections, the increase in demand for electricity will be met by new renewable or low-carbon generation assets.

The Commission also found that:

• The scheme is necessary and appropriate to support decarbonisation in sectors covered by the ETS, in line with the European and national environmental targets.
• The scheme has an “incentive effect” as the beneficiaries would not carry out the investments in decarbonisation to the same extent without the public support.
• The scheme has a limited impact on competition and trade within the EU. In particular, the aid is proportionate, and any negative effect on competition and trade will be limited in view of the design of the bidding process, which will ensure that the amount of aid is kept to the minimum.

On this basis, the Commission approved the French scheme under EU State aid rules.

Background

The  2022 CEEAG provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the European Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.

With the European Green Deal Communication in 2019, the Commission set an objective of net zero emissions of greenhouse gases in 2050 that is enshrined in the European Climate Law. In force since July 2021, the law also introduced the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030. Through the adoption of the ‘Fit for 55′ legislative proposals, the EU has in place legally binding climate targets covering all key sectors in the economy.

More information will be made available under the case number SA.112361 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.