European Government Incentives & State Aid Update - July 2022
Hickey’s European Government Incentives & State Aid Update - July 2022
The following is an update on government incentives and state aid across the dynamic European region for the month of July 2022. Information and intelligence have been assembled by Hickey’s European Location Strategy and Incentives team.
Energy and Green Incentives in Europe
The European Commission set out its intention to achieve climate neutrality by 2050 and an intermediate target to reduce its net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.
The Commission have outlined a number of legislative and funding mechanisms to help achieve these targets and the blueprint for this change is set out in the European Green Deal. Over €1 trillion has been earmarked to support the Green Deal with over half of the budget, €528 billion, coming directly from the EU and EU Emissions Trading System, while the remainder will be sourced through a combination of public and private sector through the InvestEU programme and from national co-financing.
There a number of key themes set out in the Green Deal which include targets for clean energy, sustainable industry and building and renovation. Legislative and funding schemes are being developed at both an EU level and by Member states to help them achieve these targets.
Currently, Member states are still offering incentives to encourage companies invest early in reducing their carbon emissions but the window for support is starting to close. Our discussion with funding authorities have highlighted that a shift has started and that green measures, such as minimum BREEAM ratings on new builds, are going to be a pre-requisite for some funding awards rather than a desirable measure that improves funding levels.
The targets set out in the Green Deal will play a role across a number of funding streams. However, the conflict in Ukraine has accelerated steps to increase the use of clean energy (as an alternative to Russian gas) and improve energy efficiency.
UPDATE: Temporary Crisis Framework
In March this year, the European Commission adopted a Temporary Crisis Framework to enable Member states to support the economy in the context of Russia’s invasion of Ukraine.
Individual Member states have been developing programmes under this framework, which can include funding grants up to €400,000 and subsidised loans and loan guarantees.
The aid does not need to be linked to an increase in energy prices, as the crisis and the restrictive measures against Russia affect the economy in multiple ways, including physical supply chain disruptions.
The Temporary Crisis Framework will be in place until 31 December 2022.
Member states such as Estonia, Greece, and Ireland have focused their main programmes under the framework on supporting the agricultural sector, while others have targeted support for companies in other sectors, included those most impacted by increased energy costs.
Funding programmes that have received approval by the European Commission include:
€160 million Portuguese scheme to support gas-intensive companies (direct grants)
€500 million Finnish scheme to support companies across multiple sectors impacted by sanctions and geopolitical crisis
€10 billion Spanish scheme to support companies and the self-employed (loan guarantees)
€500 million Luxembourish scheme to provide loan guarantees
€155 billion French liquidity support scheme for companies (loans and loan guarantees)
€20 billion German scheme for companies (grants, subsidised loans, and loan guarantees)
State Aid Temporary Framework - Sustainable Recovery
The majority of measures under the Temporary Framework to support the EU through the pandemic concluded at the end of June 2022. However, investment support towards a sustainable recovery under the Framework will continue to 31 December 2022. Under this category, grants of up to €10 million can be made to support with costs of investments in tangible and intangible assets to facilitate the development of certain economic activities impacted by the pandemic. This can cover up to 15% of eligible costs for large companies.
One of the more recent programmes announced under this Framework is the €7 billion French scheme aimed at providing investment support towards a sustainable recovery (aid in the form of grants, loans & loan guarantees) to finance sustainable investments in tangible and intangible assets made by companies in the industrial sector, including in the chemical industry, machinery and equipment manufacturing, and in the automotive industry.
REPowerEU
In response to the Ukrainian invasion, in addition to the Temporary Crisis Framework outlined above, the Commission have developed the REPowerEU Plan which aims at measures to support:
Saving energy;
Producing clean energy; and,
Diversifying our energy supplies
REPowerEU is the European Commission’s plan to make Europe independent from Russian fossil fuels well before 2030 and Member States are developing programmes to support with the clean energy transition and adapting industry and infrastructure to different energy sources and suppliers.
Measures that are being supported include boosting energy efficiency in buildings, and decarbonising industry. Initiatives that are being discussed include a European Solar Rooftop scheme to support accelerated installation of solar panels on buildings, doubling the deployment of heat pumps and reduced VAT rates for high efficiency heating systems and for insulation in buildings.
The Recovery and Resilience Facility, which aims to support sustainable recovery from the coronavirus pandemic, will play a key role in the implementation of some of the REPowerEU objectives. The Facility will run until 31 December 2026 and some of the key measures included in the green transition by Member States include:
Belgium - plan to supports the electrification of public and private transport, by accelerating the deployment additional electric charging stations by 2026 throughout the county, through tax incentives and concessions tenders.
Czechia - plan includes €480 million for the installation of renewable energy sources for both businesses and households.
France - plan on green investments includes support for building renovation (€5.8 billion), and the decarbonisation of industrial processes (€0.3 billion).
Germany - plan includes decarbonising the economy, especially in industry, with a focus on renewable hydrogen - €1.5 billion will be invested to support renewable hydrogen at all stages of the value chain (including production, infrastructure and use).
Sweden - plan to support investments in local and regional climate investment, including projects to reduce greenhouse gas emissions through the conversion to bioenergy for heating in industry.
What about the United Kingdom?
Outside of funding for R&D, the majority of green incentives in the UK have, until recently, been focused on environmental taxes such as Enhanced Capital Allowances and discounts on the Climate Change Levy, aimed to encourage businesses make greener investment.
Like the EU, the UK have committed to reduce its greenhouse gas emissions to net zero by 2050 – however the UK’s intermediate target is to reduce its net greenhouse gas emissions by at least 78% by 2035, compared to 1990 levels. This includes a target for all of UK’s electricity to come from clean sources by 2035, which includes investing in nuclear energy and hydrogen power generation.
Now that the UK Subsidy Control Bill has been passed, we expect new funding programmes to include green incentives and targets. For SMEs there are programmes already open around the UK which can fund up to 45% of capital costs for projects that result in significant reductions in greenhouse gas emissions.
It should be noted that the UK Government recently announced the closure of subsidies for electric cars so that it could refocus the £300 million grant funding towards industry to encourage sales of electric taxies, vans, trucks, motorcycles and wheelchair accessible vehicles.
In Northern Ireland large companies can access funding to support investment that will reduce the consumption of water, raw materials, or waste production. Currently the Resource Efficiency Capital Grant can provide funding of up to 10% of eligible project costs for large companies (maximum grant of £50,000). Applications under this programme are due to close on 6 July, 2022 and we expect new programmes to be announced.
It should be noted that under the Northern Ireland Protocol, incentives will be monitored under EU State Aid rules, in conjunction with the proposed UK Subsidy Control Rules. This does mean that new investments in Northern Ireland can still be made under the Regional Aid scheme which can provide support of up to 15% of eligible costs depending on the location of the investment.
In Scotland, the recovery plan for manufacturing includes support for companies through:
the Scottish Enterprise Green Jobs Fund to help companies in Scotland develop the low carbon products of the future and create high-quality jobs
the £180 million Emerging Energy Technologies Fund (EETF) which over the next couple of years will drive development of innovative low carbon solutions
the Low Carbon Manufacturing Challenge Fund (LCMCF) which provides support to projects that will speed up the transition to a low carbon economy in the manufacturing industry, including R&D, capital investments, and/or environmental aid projects.
For more information on these critical updates on European government incentives and state aid and/or to determine if your project is eligible, please connect with a Hickey EMEA Location Strategy & Incentives expert today: