Brussels, 21/12/2000 (Agence Europe) - The European Commission has adopted a new framework for State aid in favour of the environment, by fixing conditions whereby such aid is lawful. The Commission has on the whole taken a very favourable attitude to the aid in question, in compliance with the principle that there is no contradiction between competition policy and environment policy. However, at the same time, the Commission cannot authorise just any measure. It must take into account the effect of aid from the angle of sustainable development, take into consideration the application of the "polluter pays" principle, and avoid competition distortion.
The new rules comprise:
A positive approach to aid for renewable energy. The Commission has opted for two types of aid:
a) Aid to investment. The basic rate authorised, which was 30% in the previous guideline, has been increased to 40% for investments in favour of renewable energy, energy saving and the combined production of energy and heat. 10% bonuses may be added for SMEs, firms located in assisted regions, and investment in renewable energy that serves the needs of an entire community such as an island. This means that, depending on the case in question, the rate of aid to investment may reach 50%.
b) Operating aid. Four options are available: i) aid to compensate for the difference between the production costs of renewable energy and the market price of electricity until the plant has been fully depreciated. Aid may also cover a fair return on capital in order to attract investment; ii) recourse to market mechanisms such as "green certificates" (avoiding the risks of over-compensation); iii) compensation for "external costs" avoided. Renewable energy in many cases makes it possible to avoid high external costs for society that can now be quantified. Investments into renewable energy will be able to receive pro rata aid for the costs avoided for society (avoiding over-compensation); iv) normal operating aid, granted by the current rules in the sector (over five years, "digressive").
Tax reductions. This aspect is linked to the eco-taxes; the most advanced Member states in terms of eco-taxes may endanger their own industries by submitting them to taxes that do not affect their rivals from other Member States. Meanwhile, the Commission has provided for the possibility of authorising exemptions to eco-taxes, in favour of certain companies, for a duration of up to 10 years, if the beneficiary companies undertake to make improvements in terms of environmental protection
Specific provisions for SMEs. Small and medium-sized enterprises will be able to benefit from aid to investment to adapt to the new Community standards. This is a derogation to the general principle by which the law cannot normally provide justification for granting aid.
Rehabilitation of polluted sites. When the person responsible for pollution in known, the principle of polluter/pays applies. But if the polluter remains unknown, aid is lawful covering up to 100% of eligible costs (the cost of the work minus the increase in the value of the land) plus 15% of the value of the work.
Relocation of firms. The latter possibility is concerned notably with firms established in urban areas and whose presence gives rise to major problems for the local inhabitants. The Commission considers that aid that helps these companies more further away from urban centres is justified, to the tune of 30% of eligible costs, plus a bonus for SMEs.
All these provisions together will take effect as soon as they are published in the Official Journal, thus very soon, and will be valid until end-2007.
The European Commissioner for competition, Mario Monti, declared: "The current rules, which date from 1994, have proved effective, but Member states now intervene more frequently, for example in the energy sector, providing aid in forms that were uncommon until recently, notably tax reductions or exemptions. Similarly, new forms of operating aid are proliferating. New guidelines were needed, therefore, in order to familiarise Member States and firms with the criteria that the Commission will apply in deciding whether or not planned aid is compatible with the common market".