The Commission Amends Regional Aid Rules to Foster Support for Strategic Technology Projects

On 31 May 2024, the European Commission (“Commission”) adopted an amendment to its Regional Aid Guidelines (“RAG”), enabling EU Member States to grant higher amounts of aid to investment projects that align with the objectives of the Strategic Technologies for Europe Platform (“STEP”) in disadvantaged areas of the EU. STEP is an EU initiative aimed at enhancing the EU’s industrial competitiveness and reinforcing EU sovereignty by supporting critical and emerging strategic technologies and their respective value chains.

Key Takeaways

In the EU, large businesses can only receive State aid from Member States for their large investment projects (“LIPs”) in production facilities if these projects occur in disadvantaged areas of the EU. The conditions for accessing such State support and the maximum aid amounts are specified in the RAG. STEP’s objectives include supporting the development and manufacturing of clean tech, digital technologies, and biotech. The amendment to the RAG allows Member States to grant large businesses higher amounts of aid for their LIPs that contribute to the STEP objectives.

Regional Aid

Aid to large businesses pursuing LIPs is generally considered unnecessary and highly distortive because these businesses already have access to capital and are significant market players. Such aid can, in principle, only be authorized by the Commission under strict conditions, and if it supports an initial investment in new production facilities, output diversification into new products, or a fundamental change in a production process.

The conditions for the approval of regional aid are outlined in the RAG. The amount of aid for large projects is calculated using a complex equation based on the investment costs of the project, which are limited by a fraction that decreases to zero with higher tranches. These limited costs are then multiplied by the maximum aid intensity applicable in that region, ranging from 10% to 70%, depending on its level of economic development. In any event, the aid amount cannot exceed the net extra costs of the project compared to the costs of the counterfactual scenario that would occur in the absence of aid. The percentages for disadvantaged areas are determined in Regional Aid Maps adopted by each Member State…

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