Commission approves €4 billion French State aid scheme to support decarbonisation measures in the manufacturing sector

€4 billion French State aid

The European Commission has approved a €4 billion French scheme to support measures aiming at reducing greenhouse gas emissions in the manufacturing sector and help it transition towards a net-zero economy, in line with the Green Deal Industrial Plan. The scheme was approved under the State aid Temporary Crisis and Transition Framework, adopted by the Commission on 9 March 2023 and amended on 20 November 2023 and on 2 May 2024.

The French measure

France notified to the Commission, under the Temporary Crisis and Transition Framework, a €4 billion scheme to support (i) investments in electrification of industrial processes and (ii) investments in energy efficiency, to foster the transition to a net-zero economy.

Under this measure, the aid will take the form of direct grants amounting to up to 30% of the project's investment costs. The measure will be open to companies active in the manufacturing sector in France. Eligible electrification projects must lead to a reduction of greenhouse gas emissions from industrial processes of at least 40% compared to today, while energy efficiency projects must lead to a reduction in the energy consumed in industrial processes of at least 20% compared to today. For investments relating to activities covered by the EU Emission Trading System (‘ETS'), the emissions reduction must go below the relevant ETS benchmarks in force at the time of granting the aid.

The Commission found that the French scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework. In particular, (i) the aid per beneficiary will not exceed 10% of the total budget (i.e. €400 million); and (ii) it will be granted until no later than 31 December 2025. Furthermore, the aid will be subject to conditions to ensure actual emissions savings. The investments must be completed within 36 months after the aid has been granted.

In addition, the public support will come subject to conditions to limit undue distortions of competition. In particular, the aid must not enable the beneficiaries to increase their production capacity beyond 2% compared to today.

The Commission concluded that the French scheme is necessary, appropriate and proportionate to accelerate the green transition and facilitate the development of certain economic activities, which are of importance for the implementation of the REPower EU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.

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

Background

On 9 March 2023, the Commission adopted a new Temporary Crisis and Transition Framework to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan. The Framework amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022, to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia's war against Ukraine.

The Temporary Crisis and Transition Framework has been amended on 20 November 2023 and on 2 May 2024 to prolong a limited number of sections aimed at providing a crisis response following Russia's aggression against Ukraine and the unprecedented increase in energy prices.

The Temporary Crisis and Transition Framework, in its current form, provides for the following types of aid, which can be granted by Member States:

• Limited amounts of aid (section 2.1), in any form up to €280,000 per company active in the primary agriculture sector, and €335,000 for companies active in fisheries or aquaculture until 31 December 2024, and up to €2.25 million in all other sectors until 30 June 2024;
• Aid to compensate for high energy prices (section 2.4). The aid, which can be granted in any form until 30 June 2024, will partially compensate companies, in particular intensive energy users, for additional costs due to exceptional gas and electricity price increases; The individual aid amount may be calculated based on either past or present consumption, taking into account the need to keep market incentives to reduce energy consumption and to ensure the continuity of economic activities. In addition, Member States may provide support flexibly, including to particularly affected energy-intensive sectors, subject to safeguards to avoid overcompensation and to incentivise the reduction of the carbon footprint in case of aid amounts above €50 million. Member States are also invited to consider, in a non-discriminatory way, setting up requirements related to environmental protection or security of supply. Further details on the support possibilities for high energy prices, including on the methodology to calculate individual aid amounts, are available here;
• Measures accelerating the rollout of renewable energy (section 2.5). Member States can set up schemes for investments in all renewable energy sources, including renewable hydrogen, biogas and biomethane, storage and renewable heat, including through heat pumps, with simplified tender procedures that can be quickly implemented, while including sufficient safeguards to protect the level playing field. Under such schemes, aid may be granted until 31 December 2025; after that date, the usual State aid rules will continue to apply, including in particular the corresponding provisions of the Climate, Energy and Environmental Aid Guidelines (CEEAG);
• Measures facilitating the decarbonisation of industrial processes (section 2.6). To further accelerate the diversification of energy supplies, Member States can support investments to phase-out from fossil fuels, in particular through electrification, energy efficiency and the switch to the use of renewable and electricity-based hydrogen which complies with certain conditions, with expanded possibilities to support the decarbonisation of industrial processes switching to hydrogen-derived fuels. Member States can either (i) set up new tender-based schemes, or (ii) directly support projects, without tenders, with certain limits on the share of public support per investment. Specific top-up bonuses are foreseen for small and medium-sized enterprises as well as for particularly energy efficient solutions. In the absence of tenders, a further simpler method has been introduced to determine the level of maximum support. Under such schemes, aid may be granted until 31 December 2025; after that date, the usual State aid rules will continue to apply, including in particular the corresponding provisions of the CEEAG;
• Measures to further accelerate investments in key sectors for the transition towards a net-zero economy (section 2.8), enabling investment support for the manufacturing of strategic equipment, namely batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage as well as for production of key components and for production and recycling of related critical raw materials. More specifically, Member States may until 31 December 2025 design simple and effective schemes, providing support capped at a certain percentage of the investment costs up to specific nominal amounts, depending on the location of the investment and the size of the beneficiary, with higher support possible for small and medium-sized enterprises (‘SMEs') as well as companies located in disadvantaged regions, to ensure that cohesion objectives are duly taken into account. Furthermore, in exceptional cases, Member States may provide higher support to individual companies, where there is a real risk of investments being diverted away from Europe, subject to a number of safeguards. More information on the support possibilities for measures to accelerate the transition to a net-zero economy can be found here.

Sanctioned Russian, Belarussian and Iranian entities in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine are excluded from the scope of these measures.

The Temporary Crisis and Transition Framework complements the ample possibilities for Member States to design measures in line with existing EU State aid rules. For example, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Furthermore, Article 107(2)(b) of the Treaty on the Functioning of the European Union enables Member States to compensate companies for the damage directly caused by an exceptional occurrence, such as those caused by the current crisis.

The non-confidential version of the decision will be made available under the case number SA.108810 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.

More information on the Temporary Crisis and Transition Framework and other actions taken by the Commission to address the economic impact of Russia's war against Ukraine and foster the transition towards a net-zero economy can be found here.

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