The "incentive effect" is a rather technical issue under the State aid rules which is of huge practical importance. In a nutshell, this principle states that aid cannot be granted if the recipient had already started with the project before the application for aid was submitted. As this can lead to the complete refusal of funding, and because the recent case law - in particular the Eesti Pagar judgment (C-349/17) - is extremely harsh in defining the “start of works”, the “incentive effect” requirement has the potential to cause sleepless nights for aid recipients. Unfortunately, the most recent judgment in Est Wind Power (C-11/22) has not helped matters, but instead added to the confusion.
Keywords: Incentive Effect; Aid Application; Start of Works; Early Project Start; Investment Aid