Extraordinary supporting measures in decarbonization: French example

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The European Commission has approved a €4 billion French scheme to support national measures aimed at reducing greenhouse gas emissions in the manufacturing sector and help the country’s transition path towards a net-zero economy; the measures are in line with the EU-wide Green Deal Industrial Plan. The national scheme is also vital in supporting investments: a) in electrification of industrial processes and b) in energy efficiency, to foster the transition to a carbon neutral growth.  

Background
The EU “greed deal industrial plan” was adopted in February 2023 to enhance the competitiveness of Europe’s net-zero industry and supporting the fast transition to climate neutrality. The plan also aims to provide a more supportive environment for the scaling up of the EU’s manufacturing capacity for the net-zero technologies and products required to meet Europe’s ambitious climate targets.
The plan is supplemented by two regulatory measures: first, the Net-Zero Industry Act which identifies the member states’ goals for net-zero industrial capacity and providing for their quick implementation, as well as ensuring simplified and fast-track permitting system to promote European strategic projects. The act is also provides for the developing standards to support the scale-up of technologies across the European Single Market.
And secondly, the adoption of the Critical Raw Materials Act, is a solid background for ensuring a sufficient access to such vital resources like rare earths’ materials, that are necessary for manufacturing key technologies, and to reform the modernized electricity market and, finally, make consumers benefiting from the lower costs of renewables.
More in: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510

In order to speed up investment and financing for clean tech production in the member states including public financing (in conjunction with the progress of the EU Capital Markets Union’s requirements), the states can unlock huge amounts of private/public financing required for the green transition. Under competition policy, the Commission aims to guarantee a level playing field within the Single Market while making it easier for the states to grant necessary aid to fast-track the green transition.
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, France can support “green” investments with sufficient financial amounts.

More in the following Commission’s web-links: = A Green Deal Industrial Plan for the Net-Zero Age, and = State aid: Proposal for a Temporary Crisis and Transition Framework.

French package of support
The French package of aid takes the form of direct grants amounting to up to 30 percent of the project’s investment costs: grants are open to companies active in the manufacturing sector in France. For example, eligible electrification projects must be aimed at reduction of greenhouse gas emissions from industrial processes of at least 40 percent compared to the present level and energy efficiency projects must lead to a reduction in the energy consumed in industrial processes of at least 20 percent compared to present situation. 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 underlined that the French scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework. In particular that: a) the aid per beneficiary will not exceed 10 percent of the total budget (i.e. €400 million); and b) it will be granted until the end of 2025.
Furthermore, the aid will be subject to conditions to ensure actual emissions savings and 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 percent compared to present situation.
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 the EU Treaties (art. 107, 3, c TFEU) and with the conditions set out in the Temporary Crisis and Transition Framework.
General source: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_2785

Temporary Crisis and Transition Framework
The framework provides for the following types of aid, which can be granted by the states concerning renewables and decarbonization:
= Measures accelerating the rollout of renewable energy (Framework, sect. 2.5). The EU member states can set up national 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, financial aid from the budget may be granted until the end of 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 (Framework, sect. 2.6). To further accelerate the diversification of energy supplies, the EU 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.
In this regard, the member states can either set up new tender-based schemes, and/or 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 the end of 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 (Framework, sect. 2.8). These measures are to 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, the member states may until the end of 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, The EU 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.

Commission’s opinion
“The €4 billion scheme will support the manufacturing sector in accelerating its green transition in France. It will provide an incentive to companies to adapt their industrial processes by using less polluting and less energy consuming equipment. This will contribute to the achievement of the EU’s climate goals”.
Margrethe Vestager, Executive Vice-President in charge of competition policy
Citation from: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_2785

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