Energy & Environment

Zero Emissions: The European Commission Between Extensions and Realization

March 2023
By Gianni Pittella

March 9 was an important day for the framework of European state aid rules due to two major decisions made by the European Commission. The first decision was the adoption of a temporary framework of measures to further support the transition to a net-zero emissions economy.

With this decision, the possibility for Member States to support measures related to, for example, the expansion of renewable energies, energy storage, and the decarbonization of industrial production processes is extended until December 31, 2025. The scope of these measures is also modified by simplifying the conditions for granting aid to small-scale projects and less mature technologies, expanding the possibilities of support for the development of all types of renewable energy sources, increasing the possibilities of aid for the decarbonization of industrial production processes through conversion to hydrogen-derived fuels, and providing for higher aid ceilings and simplified calculation methods for aids.

New measures introduced until December 31, 2025, also allow for investment aid for the manufacturing of strategic equipment, such as batteries, solar panels, wind turbines, heat pumps, electrolyzers, and carbon capture and storage devices, for the production of essential components and for the production and recycling of critical raw materials needed.

With the second decision, the Commission approved a targeted amendment to the General Block Exemption Regulation, which will come into force in the coming days. This amendment affects, among other things, the following areas: aids in the environment and energy sector, the implementation of IPCEI projects, training, and requalification in all sectors, national aids to regulate energy prices, environmental aids, and aids for research, development, and innovation, including those for SMEs and start-ups. The amendments also include term extensions, increases in thresholds, and coordination provisions with other rules.

The decisions made by the Commission are certainly important for the energy transition and the crisis context we are experiencing. In particular, those on critical raw materials, which represent a potential vulnerability of the continent for the coming decades, are to be welcomed. However, it is necessary to ensure that European rules do not preclude important paths for Member States in achieving a zero-emissions economy.

As already pointed out by numerous experts and stakeholders, pursuing the energy transition solely through the relaxation of state aid risks weakening the single market and unduly facilitating states with more fiscal space, disadvantaging countries like Italy burdened by excessive public debt.

For this reason, rather than greater flexibility on state aid and the exclusion of certain investments from budgetary rules, it would be necessary for such investments to be made by a common, federal-type budgetary capacity that would carry out interventions across the entire European territory. Another fundamental aspect is that of technological neutrality, which concerns not only the rules on state aid but also the more recent decisions on the Fit for 55.

The Commission’s decisions, in fact, risk favoring only certain sectors to the detriment of others, and therefore the countries that have bet on such sectors. In particular, the adopted line seems to reward electric cars, among the various types of possible future mobility, and renewable energies, among the various types of nearly zero-emission energies, sectors on which Germany has bet. Italy, whose automotive sector is also focusing on biofuels and less on electric compared to other countries, and France, which sees nuclear energy as a priority energy source, could suffer as a result.

It is therefore necessary for the ecological transition to be carried out according to the principle of technological neutrality, because to a priori preclude possible paths risks penalizing some countries and weakening the challenge for all to build a zero-emissions economy.