Ulrich Soltész

European State Aid Law Quarterly, Volume 23 (2024), Issue 1, Page 35 - 39

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

Eszter Hargita, Filip Puzder, Péter Staviczky

European State Aid Law Quarterly, Volume 22 (2023), Issue 3, Page 242 - 266

The Inflation Reduction Act (IRA) was introduced in the US in August 2022, aiming to promote investments into clean energy production. The IRA provides huge amount of aid, which can have a draining effect of green investments vital for the green transition of the European economy. In response, the Commission adopted Temporary Crisis and Transition Framework (TCTF) in March 2023. As well as explaining the historical context and content of these subsidy-rules, this article makes an attempt to compare the subsidies available under the IRA and the TCTF, considering the maximum aid amount available under the regional aid guidelines. Keywords: Inflation Reduction Act; IRA; subsidy competition; incentive effect; operating aid; battery manufacturing; tax credit

Phedon Nicolaides

European State Aid Law Quarterly, Volume 22 (2023), Issue 2, Page 132 - 149

A fundamental criterion of the compatibility of State aid with the internal market is the presence of incentive effect. State aid must be able to change the behaviour of the recipient undertakings. The purpose of this article is threefold. First, it reviews recent case law and Commission decisions on the presence or absence of incentive effect. Second, it argues that this simple, yet fundamental criterion of compatibility suffers from a serious weakness. Third, it proposes an alternative method for establishing the existence of an incentive effect. Even when the aid is granted before the start of work, it does not necessarily follow that it induces the recipient to do something extra. A savvy company that knows how State aid rules work can adjust its investment plans in such a way as to qualify for aid, even when it does not really need it. Therefore, the new approach proposed in this article goes beyond the current test of the existence of incentive effect, asking not just whether a specific investment or project would not be carried out without the aid, but also whether the project is ‘discretionary’, in the sense that it is not indispensable for the continued operation of the recipient company. Keywords: incentive effect; necessity of State aid; indispensable expenditure; discretionary expenditure

Stefan Akira Jarecki, Kamil Ciupak

European State Aid Law Quarterly, Volume 22 (2023), Issue 4, Page 389 - 403

The incentive effect is one of the most critical conditions for the compatibility of State aid with the EU internal market. The incentive effect means that State aid should not be granted for activities in which the beneficiary would, in any case, engage even in the absence of the State aid. If a beneficiary has decided to start a given activity receiving State aid under certain conditions, these conditions should not be changed - especially the amount of the State aid. However, we are living in turbulent times. Europe's economy was hit by the COVID pandemic outbreak, then by the war in Ukraine. All European countries have experienced a drastic price increase and are struggling with high inflation. The policy of the European Green Deal had led to drastic technological change. Many beneficiaries must buy energy and products from sources that were note initially planned. In this situation, the prohibition of changing the conditions of State aid that has already been granted may turn the incentive effect into the ‘disincentive effect’. In this article, we consider how this problem can be avoided. Keywords: incentive effect, GBER, de minimis

Vittoria Musardo

European State Aid Law Quarterly, Volume 20 (2021), Issue 2, Page 217 - 228

The current revision of the Energy and Environmental State aid guidelines (EEAG) represents a unique opportunity to update and adapt the current regime to reflect the latest EU regulatory and policy developments on climate change and environmental protection and especially the new goals of the European Green Deal. In this context, it becomes paramount to develop a clear and consistent approach for singling out aid measures which are truly capable of bringing about a further level of environmental protection, necessary for attaining such bold and farsighted objectives. The present article will seek to develop a consistent evaluation model for identifying aids which are truly environmental in nature, ensuring that the advantages allocated are targeted and limited to what is strictly necessary. This standard will build on the potential for a strategic use of the Incentive Effect criteria in the assessment of the compatibility of aid measures, aimed at making sure that the behavioural shifts induced by the latter are capable of attaining a level of environmental benefit consistent with the heightened environmental objectives introduced by the Green Deal. Keywords: Green Deal; EEAG; Incentive Effect; renewable energy; environmental aid.

Caroline Buts, Malgorzata Agnieszka Cyndecka, José Luis Buendía

European State Aid Law Quarterly, Volume 20 (2021), Issue 3, Page 397 - 426

Caroline Buts, Péter Staviczky

European State Aid Law Quarterly, Volume 20 (2021), Issue 4, Page 546 - 559

Eesti Pagar constitutes a milestone in State aid law. This article provides an overview of the judgment and discusses, in chronological order, the topics of the five questions dealt with by the Court. First, we review the importance of the criterium incentive effect and more specifically the timing of the aid application in relation to the start of the project. Second, we analyse the obligation of a national authority to recover unlawful aid, also in the absence of a Commission decision. Third, we investigate whether actions by national authorities (in breach of EU law) can cause legitimate expectations for an aid beneficiary. Fourth, regarding recovery procedures without a Commission decision, we reflect on the pertinent limitation period. Finally, we examine the applicable recovery interest rate. Keywords: incentive effect; complaints; recovery; (recovery) interest rate/reference rate; limitation period, GBER, illegal aid, obligation of national granting entities Milestones Preview: this article is based on a chapter of the upcoming second edition of the book 'Milestones in State Aid Case Law' (Lexxion 2022).

Steven Verschuur, Cecilia Sbrolli

European State Aid Law Quarterly, Volume 19 (2020), Issue 3, Page 284 - 289

The European Green Deal is the prelude and the foundation of a daunting, but necessary, environmental-centric industrial revolution. EU legislation has obviously dealt with environmental policies in the past, but the European Green Deal is a far-reaching project that will require unprecedented investments. The transition envisioned in the European Green Deal will also require amendments to a wide variety of existing EU legislation and policies, including in the field of State aid. The Guidelines on State aid for environmental protection and energy (EEAG), in force until the end of 2021, are the legal framework in force to assess environmental State aid. This raises the question whether these Guidelines are a suitable instrument to achieve the objectives of the European Green Deal. This paper is the first of a series that will discuss the interplay between existing State aid rules and policy on the one hand and the European Green Deal on the other. It will provide a broader introduction to the European Green Deal and its envisaged means of financing and will discuss the application of the incentive effect to the State aid assessment of national support measures to achieve objectives of the European Green Deal. Keywords: EU Green Deal, Environmental and Energy Guidelines, incentive effect, environmental targets, financing