State aid for environmental improvement has risen dramatically, according to the European Commission. The recent revision of 2001 guidelines now includes bonus increases for eco-innovation.
Green state aid in EU countries grew from €7 billion in 2001 to €14 billion in 2006. Such increases are attributed to reductions and exemptions from en-vironmental taxes, with such measures accounting for half of the total green aid spent in 2006. These figures evidence more targeted aid being directed into improving the environment. Further growth is expected under the new set of environmental state-aid guidelines that took effect on 1 April 2008.
The manner in which each of the Member States treats the issue of green state aid spending differs greatly from country to country. A look at the percentage of GDP each provided in grants to such aid between 2004 and 2006 shows that Sweden (0.77%), Denmark (0.35%) and Germany (0.32%) are the leading contributors to their respective environmental improvement initiatives. Austria, the Netherlands and Finland were also above average spenders. Although the UK only spent half the average amount, it was still ahead of the remainder of the Member States, who failed to spend more than a quarter of the 0.12% EU average.
The Commission also notes a marked improvement in the recovery of state aid that is illegal or incompatible with EU rules. In addition, in terms of state-aid decisions taken between 2000 and 2007, the Commission will eventually recover €9 billion. To highlight the orientation of the Commissions work on this matter, all but 2% of the 350 green state-aid decisions made in 2001 and 2007 were to approve proposed payments.
Within the context of state aid eco-innovation is a crucial element in improving the competitiveness of Member States. Looking at the revised EU green-aid guidelines, which came into force in April 2008, reveals that the measures are essentially a new set of rules outlining how Member State governments are allowed to subsidise environmental improvements by companies. They were unveiled in January 2008 by Competition Commissioner Neelie Kroes, together with a set of proposals for new EU climate and energy legislation.
The Commission chose to adopt the revised guidelines in an effort to outline the maximum amount of state aid that was acceptable for a government to grant to a firm on environmental-protection grounds. The previous set of guidelines had been established in 2001 and needed updating. The intensities for large enterprises have gone from a range of 30 to 40%, to 50 to 60%. For small enterprises, the intensities have gone from between 50 and 60% to between 70 and 80%.
In the opinion of Commissioner Kroes, the guidelines will help the EU follow through on its climate commitments, pointing out that “without effective competition, targets will not be met.” Overall the Commissioner felt the new guidelines were “clearer, more transparent and more predictable” and would allow the EU climate and energy package to “open vast possibilities for innovation.”
At a basic level, the guidelines will indicate the proportion of project investment that may be met by the state without distorting competition. In reality, the new guidelines will result in increases by comparison with the 2001 guidelines in the levels of green state aid that can be granted by Member State governments. The guidelines also set aside a specific 10% bonus increase in aid for ‘eco-innovation’ purposes.
With regard to the issue of carbon-capture and storage (CSS) systems, the Commission feels it is too early to set limits on state aid for such investments. Due to their strategic importance, the Commission will have a generally positive attitude to state aid in this area. CSS projects may even qualify as ‘projects of common European interest’, exempt from the usual competition rules.
Finally, the guidelines maintain the possibility for Member State governments to introduce long-term exemptions from environmental taxes for companies in specific cases where there is a benefit to the Community and a transparent and open competitive bidding process. However, it is too soon for the Commission to give guidance on the situations where companies are covered by both environmental taxes and transferable permit schemes.
Community guidelines on state aid for environmental protection (2008/C 82/01):
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:082:0001:0033:*:PDF [229 KB]
Commission press release: State aid: latest Scoreboard shows Member States giving more aid for environmental protection: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/771&format=HTML&aged=0&language=EN&guiLanguage=en
In the context of EU state aid, eco-innovation means all forms of innovation activities resulting in or aimed at significantly improving environmental protection. Eco-innovation includes new production processes, new products or services, and new management and business methods, whose use or implementation is likely to prevent or substantially reduce the risks for the environment, pollution and other negative impacts of resources use, throughout the life cycle of related activities.