State aid rules for Energy and Environment

Directorate-General for Competition

for Energy and Environment

1 April 2014

Agenda

I. Energy and Environmental Aid Guidelines (EEAG)

II. ETS Guidelines

III.Stranded Costs Communication

IV.Council decision on aid to coal

I. ENERGY AND ENVIRONMENTAL AID GUIDELINES (EEAG)

• To be adopted in April 2014

• Applicable as from 1 July 2014 until the end of2020.2020.

• Draft for public consultation available at:

http://ec.europa.eu/competition/consultations/2013_state_aid_environment/index_en.html

• Currently the 2008 Environmetal AidGuidelines (EAG is still applicable)

EEAG: general compatibility provisions

• Common objective

• Need for State intervention

• Appropriateness of the aid

• Incentive effect

• Proportionality of the aid

• Avoidance of undue negative effects on competition and trade

EEAG: Compatible measures

1. Aid to energy from renewable resources

2. Energy efficiency measures (including 2. Energy efficiency measures (including cogeneration and district heating and district cooling)

3. Aid for resource efficiency and aid for wastemanagement

4. Aid to carbon Capture and Storage

EAG: Compatible measures

5. Aid in the form of tax reductions or exemptionsfrom environmental taxes

6. Aid in the form of reductions in funding support6. Aid in the form of reductions in funding supportfor electricity from renewable sources

7. Aid to energy infrastructure

8. Aid for generation adequacy

9. Aid in the form of tradable permit schemes

General Block Exemption Regulation (GBER)

• A simple alternative for certain measures

• Aid covered by the GBER is considered • Aid covered by the GBER is considered compatible and exempted from notification under Commission Regulation No 800/2008

• Draft for public consultation available at:

http://ec.europa.eu/competition/consultations/2013_consolidated_gber/index_en.html

General Block Exemption Regulation (GBER)

Categories of environmental aid covered :

• Going beyond the standards

• Early adaptation to standards

• Energy savings measures

• Energy efficiency projects for buildings

• Investment aid for high-efficiency cogeneration

• Aid for the promotion of energy from renewable sources

• Reductions in environmental taxes

II. ETS GUIDELINES

• - Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post 2012 allowance trading scheme post 2012 (Communication)

• - In the context of the ETS Directive: Special and temporary measures involving State aid

• - Applicable from 2013

Specific measures covered

1. Aid for indirect emission costs

2. Aid to highly efficient power plants, includningCCS-ready plantsCCS-ready plants

3. Optional transitional free allowances for themodernisation of electricity generation

4. Exclusion of small installations and hospitalsfrom the EU ETS

1. Aid for indirect emission costs

Aid to undertakings in sectors exposed to asignificant risk of carbon leakage (Annex II)

• Maximum aid intensity: • Maximum aid intensity:

• 85% (2013-2015)

• 80% (2016 – 2018)

• 75% (2019 – 2020).

• Maximum aid amount calculation depending on electricity consumption efficiency benchmarks (Annex III).

• Ex-post payment adjustment mechanism

2. Aid to new highly efficient power plants

• Eligible costs: Limited to total investment costsstrictly necessary for construction of the newpower plant. Additional costs allowed for CCS.power plant. Additional costs allowed for CCS.

• Maximum aid intensity:

• 15%, for CCS starting implementation before 2020.

• 10%, for CCS not starting implementation before 2020,aid granted after a genuinely tender process.

• 5%, for new highly efficient power plants.

3. Free allowances for modernisation of electricity generation

• Article 10c of ETS Directive: Aid involved in transitional andoptimal free allowances for the modernization of electricitygeneration and investments included in the national plansin 2013-2019in 2013-2019

• Compatibility conditions set out in the Commission Decision on guidance on the methodology to transitionally allocate free allowances to installations for electricity production and Commission Communication on the optimal application of article 10c ETS Directive

• Maximum aid intensity: 100% eligible costs

4. Exclusion of small installations and hospitals from the EU ETS

• Article 27 of the ETS Directive

• Compatible provided that:• Compatible provided that:

• small installations and hospitals are subject tomeasures that achieve equivalent green house gasemissions reduction;

• Member State comply with the conditions laid downin article 27 ETS Directive.

III. Stranded Costs Communication

• Costs of commitments of guarantees of operation givenbefore the entry into force of Directive 96/92/EC(concerning common rules for the internal market inelectricity) that cannot be honoured on account of Directive96/92/EC and which significantly affect the competitiveness96/92/EC and which significantly affect the competitivenessof the undertaking

- - Economic costs corresponding to the actual sums invested, net of income, profits, added value and/or aid

- - Most economic solution

Eligible stranded costs

• Clearly established and individualised, their triggering eventpredating liberalisation

• Computed ex ante, on a group basis

• Eligible stranded costs are the maximum aid that can be granted

• Future developments in competition to be taken into account

• Favourable view on degressivity

• Not aiming at preserving pre-liberalisation income

IV. Council decision on aid to coal

• Council Decision 2010/787/EU

(in force from 1 January 2011 until end 2027)

• Aid to uncompetitive mines for:

• Definitive closure by the end of 2018

• Exceptional costs arising from closure

It

Closure aid

• If no definitive closure at the authorised date, recovery of all granted aid within the closure plan

• Limited to cover the current production losses of coal production.coal production.

• It covers only costs in connection with:

– production of electricity;

– combined production of heat and electricity;

– production of coke and

– fuelling of blast furnaces in the steel industry

Compatibility conditions

• Part of a closure plan before end 2018

• Definitive closure of the aided production units

• Not exceeding the difference between the current production • Not exceeding the difference between the current production costs and the forseeable revenue for each coal year, subject to annual correction

• Aid must not cause prices for Union coal lower than similar coal from 3rd countries

• Aided mines had to be in activity at the end of 2009

• Regressivity

• Environmental mitigating plan

Aid for exceptional costs

• Costs from closure of coal production units

• Not related to current production

• Costs included in the Annex of the Council Decision

• Not costs arising from non-compliance withenvironmental regulations

• Thank you• Thank you• for your attention !