Guidelines on State aid, hydrogen, synthetic fuels and biofuels

The business relationships in the EU must be compliant with article 107 of Treaty on the Functioning of the European Union which lays down that: “….any aid granted by a Member State…in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market…” and again “…(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;…”.

The aid of State covers any tax measure (excises, incentives, etc) which breaches the rules on internal market. But, the treaty does not prohibit State aid justified by reasons of general economic (and sustainable) development.

In this perspective, the EU released in 2022 the “Guidelines on State aid for climate, environmental protection and energy 2022” which is aligned with the European Green Deal and ‘Fit for 55’ package of legislative proposals. These legal sources are based on “…climate neutrality, climate change adaptation, resource and energy efficiency and the ‘Energy Efficiency First’ principle, circularity, zero pollution and recovery of biodiversity and accompanying that green transition will require significant efforts and adequate support…”.

The European Commission released the guidelines beacuse has identified a number of categories of environmental protection and energy measures in respect of which State aid may be compatible with the internal market under Article 107(3), point (c), of the Treaty:   “…(a) aid for the reduction and removal of greenhouse gas emissions, including through support for renewable energy and energy efficiency ( it covers biofuels and synthetic fuels, hydrogen); (b) aid for the improvement of the energy and environmental performance of buildings; (c) aid for the acquisition and leasing of clean vehicles (used for air, road, rail, inland waterway and maritime transport) and clean mobile service equipment and for the retrofitting of vehicles and mobile service equipment; (d) aid for the deployment of recharging or refuelling infrastructure for clean vehicles; (e) aid for resource efficiency and for supporting the transition towards a circular economy; (f) aid for the prevention or the reduction of pollution other than from greenhouse gases; (g) aid for the remediation of environmental damage, the rehabilitation of natural habitats and ecosystems, the protection or restoration of biodiversity and the implementation of nature-based solutions for climate change  adaptation and mitigation; (h) aid in the form of reductions in taxes or parafiscal levies (excises and other indirect taxes on consumption); (i) aid for the security of electricity supply; (j) aid for energy infrastructure; (k) aid for district heating and cooling; (l) aid in the form of reductions from electricity levies for energy-intensive users; (m) aid for the closure of power plants using coal, peat or oil shale and of mining operations relating to coal, peat or oil shale extraction; (n) aid for studies or consultancy services on matters relating to climate, environmental protection and energy…”.

In other words, it is possible to adopt measures releated to one of these fields but the Member state has to be compliant with the criteria of proportionality and  appropriateness to minimise the distorsion of competition and trade.