National recovery and resilience plans: complex political-economy’s measures

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In the beginning of 2022, the European Commission adopted guidelines for the EU’s financial support for the member states in facilitating national political economy towards improving such parameters in development as environmental protection, climate measures’ mitigation and the energy sector’s improvement. Recent EU funding to Italy and Romania has shown guidance’s feasibility.  

The Commission regularly assesses measures entailed in the national recovery and resilience plans (NRRPs) included in the EU’s recovery and resilience facility (RRF). One of the priorities in the adopted guidance are specific support to the member states in the preparatory phases of the national plans, and secondly, to facilitate the resilient development national strategies along new priorities in climate, energy and environment.
At the same time, the Commission makes sure that the applicable EU’s “state aid rules” are complied with in the NRRPs, in order to preserve the level playing field in the European Single Market and ensure that the RRF funds are used in a way that minimises competition distortions and increases private investment protection.

New guidelines
The Guidelines on the application of state aid rules for climate, environmental protection and energy (Guidelines, 18.02.2022*) provide feasible orientation on the ways the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures in the NRRPs.
The new guidelines create a flexible, fit-for-purpose enabling framework to provide the necessary support to help the EU states, for example, reach the Green Deal objectives in a targeted and cost-effective manner. The guidelines and state rules are aligned with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas as well as in the increased importance of climate protection.

*) Communication from the Commission – Guidelines on State aid for climate, environmental protection and energy 2022. – C/2022/481; in OJ C 80, 18.2.2022, p. 1–89

The Commission has estimated that achieving recently increased climate, energy and transport targets for 2030 will require € 390 billion of additional annual investment (compared to the levels in 2011-2020), with a further € 130 billion a year for other environmental objectives.

Note. Basic management and legislation on the issues discussed:
= On “green deal”: Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions “The European Green Deal”, COM (2019) 640 final.
= On climate measures: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Stepping up Europe’s 2030 climate ambition and investing in a climate-neutral future for the benefit of our people’, COM (2020) 562 final.
= On climate neutrality: Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (OJ L 243, 9.7.2021, p. 1).
= On “Fit-for-55” plan: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – “Fit for 55”: Delivering the EU’s 2030 Climate Target on the way to climate neutrality’, COM (2021) 550 final.
= Renewable energy directive:

Guideline’s coverage
The guidelines cover state aid in a wide number of sectors and national socio-economic activities, including numerous “categories of environmental protection (involving climate measures) and energy actions”, such as:
= aid for the reduction and removal of greenhouse gas emissions, including through support for renewable energy and energy efficiency;
= aid for the improvement of the energy and environmental performance of buildings;
= aid for resource efficiency and for supporting the transition towards a circular economy;
= 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;
= aid for the security of electricity supply;
= aid for energy infrastructure; aid for district heating and cooling;
= aid for studies or consultancy services on matters relating to climate, environmental protection and energy; etc.
Source: Sect.2.2. of the Guidelines 18.02.2022.

Italian example
The Commission approved Italian scheme (available through the Recovery and Resilience Facility, RRF) to support construction and operation of new or converted biomethane production plants. The national measure is part of Italy’s strategy to reduce greenhouse gas emissions and to increase its share of renewable energies.
The scheme will also contribute to the objectives of the REPowerEU Plan to reduce dependence on Russian fossil fuels and to fast-forward moves in the green transition.
The scheme (as well as the NRRP) notified by Italy will run until 30 June 2026, and will be partly funded by the RRF, following the Commission’s positive assessment of Italy’s Recovery and Resilience Plan and its adoption by the Council in June 2021.
More on the plan in:

The scheme will also support the production of sustainable biomethane to be injected into the national gas grid for use in the transport and heating sectors. In particular, the measure is aimed at promoting the construction and the operation of new or converted biomethane production plants in Italy. In order to qualify for aid under the scheme, the biomethane production must comply with the requirements set out in the EU Renewable Energy Directive.
For biomethane to be used in the transport sector specifically, only the production of advanced biomethane will qualify for aid, as it is the most sustainable and environmentally friendly fuel, to help the EU achieve its climate and energy objectives.
The EU aid to Italian recovery/resilience plan will be granted in two forms:
= as investment grants, with a total budget of €1.7 billion, which will be paid at the end of the construction phase to all supported projects. The aid amount per project will cover up to 40% of the eligible investment costs.
= as incentive tariffs, with an estimate budget of €2.8 billion, to be paid during the operational phase of the projects, for a 15-year period. The incentive tariffs, expressed in €/MWh, will be determined in a competitive tender on a pay-as-bid principle. The support will cover the difference between the incentive tariffs and the evolving gas prices, and will be paid out on a monthly basis. In case of high gas price increases, a claw-back mechanism is in place so that any amount exceeding the incentive tariffs will be paid back.

Romanian example
The national plan and scheme notified by Romania will run until the end of 2023, and will be partially funded through the RRF, following the Commission’s positive assessment of the Romanian Recovery and Resilience Plan and its adoption by the Council.
The scheme is aimed at supporting the construction of new installations for the production of renewable hydrogen, to achieve by the end of 2025 renewable hydrogen production capacities of at least 100 MW in electrolysis installations producing at least 10,000 tones of hydrogen per year.
The scheme is open to: a) companies of all sizes that are active in the production of hydrogen or electricity, b) administrative-territorial units, and/or c) national institutes for research and development in the field of energy, including associations or partnerships formed by those actors.
Under the supporting scheme, financial assistance will take the form of direct grants; the maximum amount of aid that can be granted per project will not exceed €50 million.

According to the Commission executive vice-president M. Vestager (in charge of competition policy): “€149 million support enables Romania to step up its renewable hydrogen production capacities, while limiting possible distortions of competition”.
The supporting measure adopted for Romania will also contribute to the achievement of the EU-wide Hydrogen Strategy and the EU Green Deal programs.
At the same time, the support will assist Romania in replacing natural gas, coal and oil in hard-to-decarbonise industries and transport sectors, and in reducing its dependence on imported fossil fuels, in line with the REPowerEU Plan.
The EU-Romani’s scheme includes sections on aid for renewable energy, energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, as well as measures to ensure security of energy supply.
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